What changed in this filing

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Item 9A. Controls and Procedures

2023-02-28 compared with 2022-02-25 · 254 added, 251 removed, 1349 unchanged (27% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and regulations and that such information is accumulated and communicated to management, including ESRT's Chief Executive Officer and Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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Our responsibility is to express an opinion on the Operating Partnership’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Operating Partnership in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are

required to be independent with respect to the Operating Partnership in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Indenture, dated August 12, 2014, by and among Empire State Realty OP, L.P., as issuer, Empire State Realty Trust, Inc., and Wilmington Trust, National Association, as trustee, incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the SEC on August 12, 2014.

Form of Global Note representing Empire State Realty OP, L.P.’s 2.625% Exchangeable Senior Notes due 2019 (included in Exhibit 4.2).

Contribution Agreement among Empire Realty Trust, Inc., Empire Realty Trust, L.P.

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Amended and Restated Change in Control Severance Agreement between Empire State Realty Trust, Inc.

and Thomas N.

Keltner, Jr., dated April 5, 2016, incorporated by reference to Exhibit 10.34 to the Registrant's Form 10-Q filed with the SEC on May 5, 2016.

Amended and Restated Change in Control Severance Agreement between Empire State Realty Trust, Inc.

and Thomas P.

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and the persons named therein, dated July 15, 2014, incorporated by reference to Exhibit 10.4 to the Registrant's Form 8-K filed with the SEC on July 21, 2014.

Registration Rights Agreement, dated August 12, 2014, by and among Empire State Realty OP, L.P., Empire State Realty Trust, Inc.

and Goldman, Sachs & Co., incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on August 12, 2014.

Form of Asset and Property Management Agreement, incorporated by reference to Exhibit 10.18 to Amendment No.

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333-179485), filed with the SEC on September 6, 2013.

Amended and Restated Credit Agreement dated August 29, 2017 among Empire State Realty OP, L.P., as borrower, Empire State Realty Trust, Inc., Bank of America, N.A., as administrative agent, and the lenders and L/C issuers party hereto, Wells Fargo Bank, National Association and Capital One, National Association, as co-syndication agents, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as joint bookrunners and the other lenders party thereto, incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed with SEC on September 05, 2017.

Note Purchase Agreement, dated December 13, 2017, among Empire State Realty OP, L.P., Empire State Realty Trust, Inc.

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$100,000,000 3.61% Series G Senior Notes due March 17, 2032, $75,000,000 3.73% Series H Senior Notes due March 17, 2035 Note Purchase Agreement dated March 17, 2020 incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on March 23, 2020.

Credit Agreement Dated as of March 19, 2020 among Empire State Realty OP, L.P., as Borrower, Empire State Realty Trust, Inc., Wells Fargo Bank, National Association, as Administrative Agent, and The Lenders Party Hereto, Capital One, National Association, as Syndication Agent, U.S.

Bank National Association and Truist Bank as Documentation Agents, Wells Fargo Securities, LLC, as Sole Bookrunner, Wells Fargo Securities, LLC, Capital One, National Association, U.S.

Bank National Association and Suntrust Robinson Humphrey, Inc., as Joint Lead Arrangers incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed with the SEC on March 23, 2020.

First Amendment to Credit Agreement, dated as of March 19, 2020 (this “Amendment”), to that certain Amended and Restated Credit Agreement referenced below, is among Empire State Realty Trust, Inc., a Maryland corporation (the “Parent”), Empire State Realty OP, L.P.

(the “Borrower”), the Subsidiary Guarantors party hereto, the Lenders party hereto, Bank of America, N.A.

(“Bank of America”), as Administrative Agent, and Bank of America, Wells Fargo Bank, National Association and Capital One, National Association, as L/C Issuers incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed with the SEC on March 23, 2020.

First Amended and Restated Empire State Realty Trust, Inc.

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Form 10-Q filed with the SEC on August 10, 2020.

Second Amendment to Credit Agreement dated March 31, 2021, among Empire State Realty OP, L.P., as borrower, Empire State Realty Trust, Inc., the subsidiary guarantor parties thereto, Bank of America, N.A., as administrative agent, and the lenders and letter of credit issuers party thereto, incorporated by reference to Exhibit 10.1 to the Registrant 's Form 8-K filed with the SEC on April 1, 2021.

Form of LTIP Agreement (Executive Officer, Time Based) incorporated by reference to Exhibit 10.1 to the Empire State Realty OP, L.P.

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Form 10-Q filed with the SEC on August 5, 2021.

Second Amendment, dated as of August 29, 2022, to that certain Credit Agreement, dated as of March 19, 2020, among Empire State Realty Trust, Inc., Empire State Realty OP, L.P., the subsidiary guarantors party thereto, the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent incorporated by reference to Exhibit 10.62 to the Empire State Realty OP, L.P.

Form 10-Q filed with the SEC on November 3, 2022.

Third Amendment, dated as of August 29, 2022, to that certain Amended and Restated Credit Agreement, dated August 29, 2017, among Empire State Realty Trust, Inc., Empire State Realty OP, L.P.

, the subsidiary guarantors party thereto, the lenders party thereto, and Bank of America, N.A.

, as administrative agent incorporated by reference to Exhibit 10.62 to the Empire State Realty OP, L.P.

Form 10-Q filed with the SEC on November 3, 2022.

Subsidiaries of Registrant

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/s/ Christina Chiu

Executive Vice President and Chief Financial Officer

Executive Vice President, Chief Operating Officer and Chief Financial Officer

(Principal Financial Officer)

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/s/ Christina Chiu

Executive Vice President and Chief Financial Officer

Executive Vice President, Chief Operating Officer and Chief Financial Officer

(Principal Financial Officer)

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Horn (Principal Accounting Officer)

/s/ Leslie D.

Biddle Director February 25, 2022

/s/ Thomas J.

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As discussed in Note 2 to the consolidated financial statements, goodwill is tested for impairment at least annually or more frequently if there are indicators of impairment.

Given COVID-19’s material impact on observatory operations in 2021, the Company determined that interim impairment evaluations of goodwill were necessary for the observatory reporting unit and engaged a third-party valuation specialist to perform valuation procedures.

The Company determined that interim impairment evaluations of goodwill were necessary for the observatory reporting unit and engaged a third-party valuation specialist to perform valuation procedures.

Similarly, the Company performed its annual impairment testing as of October 1, 2022.

Auditing management’s goodwill impairment tests were complex due to the highly judgmental nature of the assumptions used.

The fair value estimates were sensitive to significant assumptions such as revenue and cost projections, the weighted average cost of capital, and income tax considerations, which are affected by expectations about future market and economic conditions.

The fair value estimates were sensitive to significant assumptions such as revenue and cost projections and the weighted average cost of capital, which are affected by expectations about future market and economic conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s goodwill impairment process, including controls over management’s review of the significant assumptions described above.

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Commercial real estate properties, net 2,414,182 2,427,979

Assets held for sale 35,538 —

Cash and cash equivalents

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Tenants’ security deposits 25,084 28,749

Liabilities related to assets held for sale 5,943 —

Total liabilities 2,480,503 2,598,115

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Private perpetual preferred units:

Series 2019 preferred units, $ 13.52 per unit liquidation preference, 4,664,038 and 4,664,038 issued and outstanding in 2021 and 2020, respectively

Series 2019 preferred units, $ 13.52 per unit liquidation preference, 4,664 issued and outstanding in 2022 and 2021, respectively

21,936 21,936

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Series 60 operating partnership units ( 5,558 and 5,885 limited partner operating partnership units outstanding at December 31, 2022 and 2021, respectively)

( 1,395 ) ( 721 )

Series 250 operating partnership units ( 2,789 and 2,971 limited partner operating partnership units outstanding at December 31, 2022 and 2021, respectively)

( 692 ) ( 356 )

Total Empire State Realty OP, L.P.'s capital 1,667,625 1,671,080

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Interest expense ( 101,206 ) ( 94,394 ) ( 89,907 )

Gain on sale/disposition of properties 33,988 — —

Loss on early extinguishment of debt — ( 214 ) ( 86 )

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Income (loss) before income taxes 64,758 ( 14,771 ) ( 29,860 )

Income tax benefit (expense) 1,734 6,971 ( 2,429 )

Income tax (expense) benefit ( 1,546 ) 1,734 6,971

Net income (loss) 63,212 ( 13,037 ) ( 22,889 )

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

4,610 21,147 — — ( 2,488 ) ( 20,613 ) ( 1,632 ) ( 432 ) ( 303 ) ( 63 ) ( 187 ) ( 39 ) — —

Conversion of operating partnership units and Class B shares to ESRT Partner's Capital — — 6,807 29,863 ( 3,751 ) ( 29,803 ) ( 2,175 ) ( 92 ) ( 601 ) 22 ( 280 ) 10 — —

— — 6,929 27,495 ( 3,208 ) ( 26,323 ) ( 2,687 ) ( 918 ) ( 692 ) ( 171 ) ( 342 ) ( 83 ) — —

Repurchases of common units — — ( 17,279 ) ( 143,713 ) — — — — — — — — — ( 143,713 )

Equity compensation — — 143 921 2,815 24,574 — — — — — — — 25,495

Distributions — ( 4,197 ) — ( 37,181 ) — ( 16,247 ) — ( 5,264 ) — ( 1,435 ) — ( 723 ) — ( 65,047 )

Net income — 1,743 — 49,445 — 21,958 — 7,925 — 2,146 — 1,073 — 84,290

Net income (loss) — 4,197 — ( 16,712 ) — ( 7,043 ) — ( 2,356 ) — ( 650 ) — ( 325 ) — ( 22,889 )

Other comprehensive loss — — — ( 6,449 ) — ( 2,718 ) — ( 909 ) — ( 251 ) — ( 125 ) — ( 10,452 )

— — — ( 12,328 ) — ( 5,475 ) — ( 1,976 ) — ( 535 ) — ( 268 ) — ( 20,582 )

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 OP units 54 789 — — ( 97 ) ( 800 ) 43 11 — — — — — —

Conversion of operating partnership units and Class B shares to ESRT Partner's Capital — — 3,498 10,426 ( 1,317 ) ( 10,643 ) ( 1,357 ) 105 ( 540 ) 73 ( 285 ) 39 — —

Repurchases of common units — — ( 4,887 ) ( 46,704 ) — — — — — — — — — ( 46,704 )

Contributions to consolidated joint venture interests — — — — — — — — — — — — 13,269 13,269

Equity compensation — — 41 513 782 19,747 — — — — — — — 20,260

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Net income (loss) — 4,201 — ( 10,711 ) — ( 4,513 ) — ( 1,429 ) — ( 379 ) — ( 189 ) ( 17 ) ( 13,037 )

Other comprehensive loss — — — ( 6,449 ) — ( 2,718 ) — ( 909 ) — ( 251 ) — ( 125 ) — ( 10,452 )

Other comprehensive income — — — 7,465 3,144 996 264 132 — 12,001

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 OP units — — — — — — — — — — — — — —

Conversion of operating partnership units and Class B shares to ESRT Partner's Capital — — 2,298 4,495 ( 551 ) ( 4,563 ) ( 1,240 ) 26 ( 326 ) 21 ( 181 ) 21 — —

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Distributions — ( 4,201 ) — ( 23,109 ) — ( 11,251 ) — ( 3,025 ) — ( 800 ) — ( 400 ) — ( 42,786 )

Net income (loss) — 4,201 — ( 10,711 ) — ( 4,513 ) — ( 1,429 ) — ( 379 ) — ( 189 ) ( 17 ) ( 13,037 )

Net income — 4,201 — 36,442 — 16,116 — 4,800 — 1,244 — 652 ( 243 ) 63,212

Other comprehensive income — — — 27,701 12,251 3,648 946 495 2,233 47,274

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Depreciation and amortization 216,894 201,806 191,006

Gain on sale/disposition of properties ( 33,988 ) — —

Impairment charges — 7,723 6,204

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Cash Flows From Investing Activities

Short-term investments — — 400,000

Net proceeds from disposition of real estate 11,005 — —

Additions to building and improvements ( 126,268 ) ( 95,037 ) ( 143,118 )

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Acquisition of real estate property ( 115,593 ) ( 117,540 ) —

Net cash (used in) provided by investing activities ( 212,742 ) ( 143,118 ) 149,744

Net cash used in investing activities ( 230,891 ) ( 212,742 ) ( 143,118 )

The accompanying notes are an integral part of these financial statements

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Proceeds from unsecured senior notes — — 175,000

Repayment of unsecured senior notes — — ( 250,000 )

Proceeds from unsecured term loan — — 175,000

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

Contributions from consolidated joint ventures 224 — —

Deferred financing costs — ( 9,486 ) ( 10,135 )

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Distributions ( 38,585 ) ( 28,563 ) ( 60,850 )

Net cash provided by (used in) financing activities ( 93,045 ) 257,167 ( 381,551 )

Net cash (used in) provided by financing activities ( 140,242 ) ( 93,045 ) 257,167

Net increase (decrease) in cash and cash equivalents and restricted cash ( 159,960 ) ( 93,301 ) 296,342

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Cash paid for interest $ 91,012 $ 77,610 $ 75,416

Interest capitalized $ — $ — $ 1,433

Cash paid for income taxes $ 200 $ 644 $ 1,282

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Write-off of fully depreciated assets 35,124 31,341 79,527

Derivative instruments at fair values included in prepaid expenses and other assets 17,902 — —

Derivative instruments at fair values included in accounts payable and accrued expenses

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Conversion of operating partnership units and Class B shares to Class A shares 4,495 10,426 29,863

Transfer of assets related to assets held for sale 35,538 — —

Transfer of liabilities related to assets held for sale 5,943 — —

Mortgage assumed in connection with sale of real estate 30,117 — —

Issuance of Series 2019 private perpetual preferred in exchange for operating partnership units

Right of use assets — — 29,452

Ground lease liabilities — — 29,452

Debt assumed with the acquisition of real estate properties — 177,453 —

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As of December 31, 2022, ESRT owned approximately 59.4 % of our operating partnership units.

As of December 31, 2021, 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 interest) encompassing approximately 9.4 million rentable square feet of office space.

Nine of these properties are located in the midtown Manhattan market and encompass in the aggregate approximately 7.6 million rentable square feet of office space, including the Empire State Building.

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

As of December 31, 2022, our office and retail portfolio contained 9.7 million rentable square feet of office and retail space, and was 85.2 % occupied.

Including signed leases not yet commenced, our total office and retail portfolio was 88.6 % leased.

As of December 31, 2022, we owned 12 office properties (including three long-term ground leasehold interests) encompassing approximately 8.9 million rentable square feet of office space, which were approximately 85.1 % occupied or 88.3 % leased including signed leases not yet commenced.

Nine properties are located in the midtown Manhattan market and encompass approximately 7.6 million rentable square feet of office space, including the Empire State Building.

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

Three office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing approximately 1.3 million rentable square feet.

The majority of the square footage for these three 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, which we refer to herein as Metro Tower.

As of December 31, 2021, our portfolio also included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing 0.2 million rentable square feet in the aggregate.

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

As of December 31, 2022, our commercial portfolio also included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing 0.2 million rentable square feet in the aggregate.

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

Note 3 Acquisitions and Dispositions.

As of December 31, 2022, our standalone retail properties were 97.6 % leased.

Additionally, as of December 31, 2022, our portfolio included three multifamily properties located in Manhattan totaling 721 units of which 96.3 % were leased.

We have two entities that elected, together with ESRT, to be treated as taxable REIT subsidiaries, or TRSs, of ESRT.

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

In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members as well as whether the entity is a variable interest entity (“VIE”) and whether we are the primary beneficiary.

whether we are the primary beneficiary.

The primary beneficiary of a VIE is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.

The primary beneficiary is required to consolidate the VIE.

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

As of December 31, 2022, we have a variable interest in and are deemed to be the primary beneficiary of ESRT 298 Mulberry, L.L.C.

which is the entity through which we acquired a multifamily asset located at 298 Mulberry Street in Manhattan in December 2022 (see Note 3 Acquisitions and Dispositions).

We had no VIEs as of December 31, 2021.

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

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In some leases, in lieu of paying additional rent based upon increases in building operating expenses, the tenant will pay additional rent based upon increases in an index such as the Consumer Price Index over the index value in effect during a base year, or contain fixed percentage increases over the base rent to cover escalations.

For Coronavirus 2019 (“COVID-19”) pandemic related rent deferral agreements, we will generally elect to record rental revenue and a receivable during the deferral period.

We recognize rental revenue of acquired in-place above- and below-market leases at their fair values over the terms of the respective leases, including, for below-market leases, fixed option renewal periods, if any.

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Deferred revenue related to unused and unexpired tickets as of December 31, 2022 and 2021 was $ 1.4 million and $ 0.9 million, respectively, and is included in deferred revenue and other liabilities on the consolidated balance sheets.

Gains on Sale of Real Estate

Gains on Sale/Disposition of Real Estate

We record a gain on sale of real estate pursuant to provisions under Accounting Standards Codification (ASC) 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets.

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Capitalization of interest ceases when the asset is ready for its intended use, which is generally near the date that a certificate of occupancy is obtained.

Total capitalized interest for the year ended December 31, 2019 was $ 1.4 million.

There was no capitalized interest for the years ended December 31, 2022 and 2021.

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Acquisitions of properties are accounted for utilizing the acquisition method and accordingly the purchase cost is allocated to tangible and intangible assets and liabilities based on their fair values.

The fair value of tangible assets acquired is determined by valuing the property as if it were vacant, applying methods similar to those used by independent appraisers of

income-producing property.

The fair value of tangible assets acquired is determined by valuing the property as if it were vacant, applying methods similar to those used by independent appraisers of income-producing property.

The resulting value is then allocated to land, buildings and improvements, and tenant improvements based on our determination of the fair value of these assets.

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If the undiscounted cash flows do not exceed the carrying value, the real estate is adjusted to fair value and an impairment loss is recognized.

Assets held for sale are recorded at the lower of cost or fair value less costs to sell.

Assets held for sale are recorded at the lower of cost or fair value less costs to sell and depreciation expense is no longer recorded.

During the fourth quarter 2021, we suspended debt service related to a $ 30 million mortgage secured by our property in Norwalk, Connecticut and we identified this action as an indicator of impairment.

We concluded that the cost basis of the asset exceeds its fair value when considering our reduced holding period given our new intent to transfer property ownership to the lender.

As such, we incurred a $ 7.7 million impairment charge.

We concluded that the cost basis of the asset exceeded its fair value when considering our reduced holding period given our intent to transfer property ownership to the lender.

As such, we incurred a $ 7.7 million impairment charge in the year ended December 31, 2021.

Our methodology to calculate the fair value of the property involved a combination of the discounted cash flow method, utilizing Level 3 unobservable inputs such as market capitalization rates obtained from external sources, and the market- based approach utilizing recent sales comparables.

During April 2022, we transferred 383 Main Avenue, Norwalk CT back to the lender in a consensual foreclosure.

Refer to Note 3 Acquisitions and Dispositions.

We do not believe that the value of any of our other properties and intangible assets were impaired during the years ended December 31, 2022, 2021 and 2020.

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Non-amortizing intangible assets, such as trade names and trademarks, are subject to an annual impairment test based on fair value and amortizing intangible assets are tested whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

In compliance with the requirements of authorities, we closed the Empire State Building observatory on March 16, 2020 due to the COVID-19 pandemic and it remained closed until the 86th floor observation deck was reopened on July 20, 2020.

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, and each subsequent quarters, to choose to perform an impairment test related to goodwill.

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

The analysis used a combination of the discounted cash flow method (a form of the income approach) utilizing Level 3 unobservable inputs and the guideline company method (a form of the market approach).

Significant assumptions under the former included revenue and cost projections, weighted average cost of capital, long-term growth rate and income tax considerations while the latter included guideline company enterprise values, revenue multiples and

control premium rates.

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 stand-alone 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.

Fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability.

As a basis for considering market participant assumptions in fair value measurements, the FASB guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

inputs that are classified within levels one and two of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

The methodologies used for valuing financial instruments have been categorized into three broad levels as follows:

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Accordingly, no provision has been made for federal and state income taxes.

ESRT has elected, together with ESRT Observatory TRS, L.L.C., our subsidiary which holds our observatory operations, to treat ESRT Observatory TRS, L.L.C.

ESRT has elected, together with ESRT

Observatory TRS, L.L.C., our subsidiary that holds our observatory operations, to treat ESRT Observatory TRS, L.L.C.

ESRT has elected, together with ESRT Holdings TRS, L.L.C., our subsidiary that holds our third party management, restaurant, cafeteria, health clubs and certain cleaning operations, to treat ESRT Holdings TRS, L.L.C.

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Share-Based Compensation

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 the stated vesting period, which is generally three or four years, depending on retirement eligibility.

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) has first completed ten years of continuous service with ESRT or its 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.

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.

Any forfeitures of share-based compensation awards are recognized as they occur.

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Our observatory segment operates the 86th and 102nd floor observatories at the Empire State Building.

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 different marketing strategies.

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 different 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.

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 global 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).

1 unchanged sentence

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.

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.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848) Deferral of the Sunset Date of Topic 848 which defers the sunset date of ASU 2022-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform to December 31, 2024.

ASU 2022-06 is effective immediately for all companies.

ASU 2022-06 did not have an impact on our consolidated financial statements for the year ended December 31, 2022.

Acquisitions and Dispositions

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.

298 Mulberry Street is located at the intersection of East Houston Street and Mulberry Street, walking distance to New York University’s campus in the NoHo neighborhood of Manhattan.

In addition to the 96 residential units, the property also contains retail space leased to CVS and a garage.

The purchase price is the fair value at the date of acquisition.

On December 22, 2021, we acquired 90 % of two multifamily assets located in Manhattan, the Victory (561 10th Avenue) and 345 East 94th Street, previously owned by a joint venture of Fetner Properties and an institutional owner.

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The purchase price of the non-controlling interest is its fair value at the date of acquisition.

The Victory is a 417 unit, 45 -story apartment building at the corner of 10th Avenue and 41st Street near Hudson Yards.

It is a participant in an extendable 421a tax abatement program.

The Class A, 310,707 square feet asset offers a mix of studio, 1- and 2-bedroom units and a full suite of amenities including 24-hour concierge, fitness center with half-court basketball, resident lounge with outdoor terraces, roof deck and parking, as well as an 11,000 square feet retail space leased to CVS through 2040.

345 East 94th Street is a 208 unit, 30 -story, apartment building at the corner of 1st Avenue and 94th Street near the 2nd Avenue subway line at 96th Street.

It is a participant in an extendable 421a tax abatement program.

The Class A, 168,243 square feet asset offers a mix of studio, 1- and 2- bedroom units and a full suite of amenities including a 24-hour concierge, fitness center, resident lounge, outdoor terrace and parking.

Assets and liabilities acquired are as follows (amounts in thousands):

Land Building and Improvements Assets Liabilities Total

Date Acquired Land Building and Improvements Assets Liabilities Total*

298 Mulberry Street 12/20/2022 $ 40,935 $ 69,508 $ 5,300 $ ( 150 ) $ 115,593

The Victory 12/22/2021 91,437 124,997 13,573 ( 19,895 ) 210,112

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12/22/2021 44,228 55,766 4,824 ( 5,491 ) 99,327

$ 135,665 $ 180,763 $ 18,397 $ ( 25,386 ) $ 309,439 *

*Includes total capitalized transaction costs of $ 3.1 million.

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 in White Plains, NY, which was encumbered by a $ 30.0 million mortgage, at a gross asset valuation of $ 42.0 million and recorded a gain of $ 6.8 million, which is included in Gain on sale/disposition of properties in our consolidated statement of operations.

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.

The assets and related liabilities of the 500 Mamaroneck property are classified as held for sale in our consolidated balance sheet as of December 31, 2022 having met the held for sale criteria set forth in ASC 360 Property, Plant, and Equipment.

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 Note 11 Related Party Transactions .

Deferred Costs, Acquired Lease Intangibles and Goodwill

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and 501 Seventh Avenue Associates, L.L.C.

for an amount in excess of their net tangible and identified intangible assets and liabilities and as a result we recorded goodwill related to the transaction.

for an amount in excess of their net tangible and

identified intangible assets and liabilities and as a result we recorded goodwill related to the transaction.

Goodwill was allocated $ 227.5 million to the observatory operations of the Empire State Building, $ 250.8 million to Empire State Building, and $ 13.2 million to 501 Seventh Avenue.

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

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

From the quarter ended June 30, 2020 and for each subsequent quarter through our annual goodwill testing in October 2022, we bypassed the optional qualitative goodwill impairment assessment and proceeded directly to a quantitative assessment of the observatory reportable segment and engaged a third-party valuation consulting firm to perform the valuation process.

This was done in response to the closure of the observatory on March 16, 2020, due to the COVID-19 pandemic, which was subsequently fully reopened on August 24, 2020.

The quantitative analysis used a combination of the discounted cash flow method (a form of the income approach) utilizing Level 3 unobservable inputs and the guideline company method (a form of the market approach).

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 %.

Each quantitative analysis performed concluded the fair value of the standalone observatory reporting unit exceeds its carrying value.

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.

We will continue to assess the impairment of the observatory reporting unit goodwill going forward.

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

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10 Bank Street (4)

— 31,091 — % — % —

383 Main Avenue (5)

— 30,000 — % — % —

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

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Unsecured revolving credit facility (6)(7)

— — LIBOR plus 1.30 %

— — SOFR plus 1.30 %

— % 3/31/2025

Unsecured term loan facility (6)(7)

215,000 215,000 LIBOR plus 1.20 %

215,000 215,000 SOFR plus 1.20 %

4.22 % 3/19/2025

Unsecured term loan facility (6)(7)

175,000 175,000 LIBOR plus 1.50 %

175,000 175,000 SOFR plus 1.50 %

4.51 % 12/31/2026

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_____________

(1) The effective rate is the yield as of December 31, 2021, including the effects of debt issuance costs and interest rate swaps.

(1) The effective rate is the yield as of December 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 of 4.09 % and a $ 14.8 million loan bearing interest at 6.25 %.

(4) 10 Bank Street was sold in December 2022.

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

(6) At December 31, 2022, we were in compliance with all debt covenants.

(7) As of August 29, 2022, the benchmark index interest rate was converted from LIBOR to SOFR, plus a benchmark adjustment of 10.0 basis points.

Principal Payments

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We had suspended debt service as of November 1, 2021 and we identified this action as an indicator of impairment.

We concluded that the cost basis of the asset exceeds its fair value when considering our reduced holding period given our new intent to transfer property ownership to the lender.

We believe this action is in the best interest of our shareholders given the challenging fundamentals of the Norwalk, CT submarket.

During the quarter, we had incurred an $ 7.7 million impairment charge on the same property.

We concluded that the cost basis of the asset exceeded its fair value when considering our reduced holding period given our intent to transfer property ownership to the lender.

We believe this action was in the best interest of our shareholders given the challenging fundamentals of the Norwalk, CT submarket.

During the quarter ended December 31, 2021, we had incurred an $ 7.7 million impairment charge on the same property.

Refer to Note 2 Summary of Significant Accounting Policies.

Except as noted above, we are not in default on any of our loan agreements.

On December 22, 2021, we acquired two multifamily assets, the Victory (561 10th Avenue) and 345 East 94th Street.

In connection with this acquisition, we assumed $ 134.0 million of debt on the Victory, which matures in November 2033 and has an effective interest rate of 3.85 %, and $ 52 million of debt on 345 East 94th Street, which matures in November 2030 and has an effective interest rate of 3.56 %.

During April 2022, we transferred 383 Main Avenue, Norwalk CT back to the lender in a consensual foreclosure.

Refer to Note 3 Acquisitions and Dispositions.

Except as noted above, we were not in default on any of our loan agreements as of December 31, 2021.We were not in default on any of our loan agreements as of December 31, 2022.

Unsecured Revolving Credit and Term Loan Facilities

On March 31, 2021, we entered into a second amendment to an existing credit agreement ("Amended Credit Agreement") that will govern an amended senior unsecured credit facility (the “Credit Facility”) with Bank of America, N.A., as administrative agent, and Bank of America, Wells Fargo Bank, National Association, Capital One, National Association and JPMorgan Chase Bank, N.A., as co-syndication agents, and the lenders and the letter of credit issuers party thereto.

The Amended Credit Agreement amends the amended and restated credit agreement dated August 29, 2017, as amended, 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 a $ 850.0 million revolving credit facility and a $ 215.0 million term loan facility.

We borrowed the term loan facility in full in August 2017.

We may request the Credit Facility be increased through one or more increases in the revolving credit facility or one or more increases in the term loan facility or the addition of new pari passu term loan tranches, for a maximum aggregate principal amount not to exceed $ 1.50 billion.

The Credit Facility will be used for our working capital needs and for other general corporate purposes.

On August 29, 2022, we entered into a third amendment to our amended and restated credit agreement dated August 29, 2017 with Bank of America, N.A., as administrative agent and the other lenders party thereto, which governs our senior unsecured revolving credit facility and term loan facility (collectively, the “BofA Credit Facility”).

The BofA Credit Facility is in the initial maximum principal amount of up to $ 1.065 billion, which consists of a $ 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.

The third amendment revised the terms of the BofA Credit Facility to (i) replace LIBOR with SOFR given the phase out of LIBOR and (ii) permit the addition of multifamily assets as Unencumbered Eligible Property (as defined therein) and add a capitalization rate for such assets.

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

The revolving credit facility matures on March 31, 2025.

We have the option to extend the initial term for up to two additional 6-month periods, subject to certain conditions, including the payment of an extension fee equal to 0.0625 % and 0.075 % of the then outstanding commitments under the revolving credit facility on the first and the second extensions, respectively.

The term loan facility matures on March 19, 2025.

We may prepay the loans under the Credit Facility at any

time in whole or in part, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar Rate borrowings.

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, Wells Fargo Securities, LLC as sole bookrunner, Wells Fargo Securities, LLC, Capital One, National Association, U.S.

Bank National Association and SunTrust Robinson Humphrey, Inc.

as Joint Lead Arrangers, Capital One, National Association, as syndication agent, U.S.

Bank National Association and Truist Bank, as documentation agents, and the lenders party thereto.

The Term Loan Facility is in the original principal amount of $ 175 million which we borrowed in full at closing.

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 December 31, 2021, our borrowings amounted to $ 175.0 million under the Term Loan Facility.

The Term Loan Facility matures on December 31, 2026.

We may prepay loans under the Term Loan Facility at any time in whole or in part, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar rate borrowings.

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.

On August 29, 2022, we entered into a second amendment to our credit agreement dated March 19, 2020 with Wells Fargo Bank, National Association, as administrative agent, and the other lenders party thereto, which governs a senior unsecured term loan facility (the “Wells Term Loan Facility”).

The Wells Term Loan Facility is in the original principal amount of $ 175 million and matures on December 31, 2026.

The second amendment revised the terms of the Wells Term Loan Facility to (i) replace LIBOR with SOFR given the phase out of LIBOR and (ii) permit the addition of multifamily assets as Unencumbered Eligible Property (as defined therein) and add a capitalization rate for such assets.

We may request the Wells 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 December 31, 2022, our borrowings amounted to $ 175.0 million under the Wells Term Loan Facility.

The terms of both the BofA Credit Facility and the Wells 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.

It also requires 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 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 December 31, 2021, we were in compliance with the covenants under the Credit Facility and the Term Loan Facility.

Senior Unsecured Notes Exchangeable

During August 2014, we issued $ 250.0 million principal amount of 2.625 % Exchangeable Senior Notes (“ 2.625 % Exchangeable Senior Notes”) due August 15, 2019.

The 2.625 % Exchangeable Senior Notes were exchangeable into cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at our election.

On August 15, 2019, we settled the principal amount of the 2.625 % Exchangeable Senior Notes in cash.

For the year ended December 31, 2019, total interest expense related to the 2.625 % Exchangeable Senior Notes was $ 6.1 million, consisting of (i) contractual interest expense of $ 4.1 million, (ii) additional non-cash interest expense of $ 1.6 million, related to the accretion of the debt discount, and (iii) amortization of deferred financing costs of $ 0.4 million.

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

Senior Unsecured Notes

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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 December 31, 2021, we were in compliance with the covenants under the outstanding Senior Unsecured Notes.

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

Accounts Payable and Accrued Expenses

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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 December 31, 2021, 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 $ 26.7 million.

If we had breached any of these provisions at December 31, 2021, we could have been required to settle our obligations under the agreements at their termination value of $ 26.7 million.

As of December 31, 2022, we did not have any derivatives in a net liability position.

In May 2022, we entered into forward interest rate swaps with an aggregate notional value of $ 390.0 million that became effective in August 2022 and fixed the interest rate on 100 % of our term loans.

This replaced the $ 265.0 million swap which had fixed the interest rate on a portion of our outstanding term loans balance.

As of December 31, 2022 and 2021, we had interest rate LIBOR swaps and caps with an aggregate notional value of $ 574.8 million and $ 451.3 million, respectively.

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

As of December 31, 2021 and 2020, the fair value of our derivative instruments amounted to ($ 25.3 million) and ($ 8.8 million), respectively, which is included in accounts payable and accrued expenses on the consolidated balance sheets.

As of December 31, 2022 and 2021, the fair value of our derivative instruments amounted to $ 17.9 million, which is included in prepaid expenses and other assets and ($ 25.3 million), which is included in accounts payable and accrued expenses on the consolidated balance sheets.

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 December 31, 2021 and 2020, our cash flow hedges are deemed highly effective and for the years ended December 31, 2021 and 2020, net unrealized gains (losses) of $ 12.0 million and $( 10.5 ) million, respectively, are reflected in the consolidated statements of comprehensive income (loss) relating to both active and terminated cash flow hedges of interest rate risk.

As of December 31, 2022 and 2021, our cash flow hedges are deemed highly effective and for the years ended December 31, 2022 and 2021, net unrealized gains of $ 47.3 million and $ 12.0 million, respectively, are reflected in the consolidated statements of comprehensive income (loss) relating to both active and terminated cash flow hedges of interest rate risk.

Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the debt.

We estimate that $ 10.7 million net loss of the current balance held in accumulated other comprehensive loss will be reclassified into interest expense within the next 12 months.

We estimate that $ 6.3 million net gain 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 agreement and the fair value of our derivative financial instruments as of December 31, 2022 and 2021 (dollar amounts in thousands):

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

Interest rate swap 175,000 SOFR Compound 2.5620 % August 31, 2022 December 31, 2026 8,040 — — —

Interest rate swap 107,500 SOFR Compound 2.6260 % August 19, 2022 March 19, 2025 3,766 — — —

Interest rate swap 107,500 SOFR OIS Compound 2.6280 % August 19, 2022 March 19, 2025 3,762 — — —

$ 17,936 $ — $ 13 $ ( 25,308 )

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The table below shows the effect of our derivative financial instruments designated as cash flow hedges on accumulated other comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020 (amounts in thousands):

Effects of Cash Flow Hedges December 31, 2021

December 31, 2020

December 31, 2019

Effects of Cash Flow Hedges December 31, 2022 December 31, 2021 December 31, 2020

Amount of gain (loss) recognized in other comprehensive income (loss) $ 40,044 $ 348 $ ( 19,322 )

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Total Level 1 Level 2 Level 3

Interest rate swaps included in accounts payable and accrued expenses $ 25,308 $ 25,308 $ — $ 25,308 $ —

Interest rate swaps included in prepaid expenses and other assets 17,936 17,936 — 17,936 —

Mortgage notes payable 883,705 783,648 — — 783,648

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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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Keltner, Jr., and our subsidiary ESRT MH Holdings LLC, the former supervisor of ESBA, (the "Respondents").

The statement of claim (also filed later in federal court in New York for the expressed purpose of tolling the statute of limitations) alleges breach of fiduciary duty and related claims in connection with the Offering and formation transactions and seeks $ 20 million monetary damages and declaratory relief.

Claimants had opted out of a prior class action bringing similar claims that was settled with court approval.

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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.

The appeals court has scheduled argument on the appeal and motion for April 10, 2023.

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

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Major Customers and Other Concentrations

For the year ended December 31, 2021, other than four tenants who accounted for 4.6 %, 3.3 %, 2.8 % and 2.1 % of rental revenues, no other tenant in our portfolio accounted for more than 2.0% of rental revenues.

For the year ended December 31, 2022, other than two tenants who accounted for 6.4 % and 2.0 % of rental revenues, no other tenant in our portfolio accounted for more than 2.0% of rental revenues.

For the year ended December 31, 2019, other than three tenants who accounted for 6.8 %, 3.2 % and 3.2 % of rental revenues, no other tenant in our portfolio accounted for more than 2.0% of rental revenues.

For the years ended December 31, 2021, 2020 and 2019, the six properties listed below accounted for the indicated percentage of total rental revenues.

No other property accounted for more than 5.0% of total rental revenues.

For the year ended December 31, 2021, other than four tenants who accounted for 4.6 %, 3.3 %, 2.8 % and 2.1 % of rental revenues, no other tenant in our commercial portfolio accounted for more than 2.0% of rental revenues.

For the year ended December 31, 2020, other than two tenants who accounted for 6.9 % and 3.5 % of rental revenues, no other tenant in our portfolio accounted for more than 2.0% of rental revenues.

For the years ended December 31, 2022, 2021 and 2020, the six properties listed below accounted for the highest respective percentages of total rental revenues.

Year Ended December 31,

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Separate actuarial information regarding such pension plans is not made available to the contributing employers by the union administrators or trustees, since the plans do not maintain separate records for each reporting unit.

However, on September 27, 2019, September 28, 2020 and September 28, 2021, the actuary certified that for the plan years beginning July 1, 2019, July 1, 2020 and July 1, 2021, respectively, the Pension Plan was in critical status under the Pension Protection Act of 2006.

On September 28, 2020 and September 28, 2021, the actuary certified that for the plan years beginning July 1, 2020 and July 1, 2021, respectively, the Pension Plan was in critical status under the Pension Protection Act of 2006.

The Pension Plan trustees adopted a rehabilitation plan consistent with this requirement.

For the years ended June 30, 2020 and 2019, the Pension Plan received contributions from employers totaling $ 291.3 million and $ 290.1 million, respectively.

However, on September 28, 2022, the actuary certified that for the plan year beginning July 1, 2022, the Pension Plan was in endangered status under the Pension Protection Act of 2006.

The Pension Plan trustees adopted a funding improvement plan consistent with this requirement.

For the plan years ended June 30, 2020 and June 30, 2021, the Pension Plan received contributions from employers totaling $ 291.3 million and $ 290.1 million, respectively.

The Form 5500 is not yet available for the plan year June 30, 2022.

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Generally, these agreements provide that the employers contribute to the Health Plan at a fixed rate on behalf of each covered employee.

For the years ended June 30, 2020 and 2019, the Health Plan received contributions from employers totaling $ 1.6 billion and $ 1.5 billion, respectively.

For the plan years ended June 30, 2020, and June 30, 2021, the Health Plan received contributions from employers totaling $ 1.6 billion and $ 1.5 billion, respectively.

The Form 5500 is not yet available for the plan year June 30, 2022.

Term of Collective Bargaining Agreement

The most recent collective bargaining agreement for Local 32BJ commenced from January 1, 2020 and runs through December 31, 2023.

Term of Collective Bargaining Agreements

Our collective bargaining agreement for local 32BJ commenced from January 1, 2020 and runs through December 31, 2023.

We are also a signatory to a second collective bargaining agreement for local 32BJ with a term from April 21, 2022 to April 20, 2026 for our residential properties.

Contributions

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*** Other consists of union costs which were not itemized between pension and health plans.

Other includes $ 0.2 million,

$ 0.3 million and $ 0.4 million for the years ended 2021, 2020 and 2019, respectively, in connection with other multiemployer plans not discussed above.

The decrease in plan contributions in 2020 is mainly due to the reduction in payroll levels as a result of the COVID-19 pandemic.

Other includes $ 0.2 million, $ 0.2 million and $ 0.3 million for the years ended 2022, 2021 and 2020, respectively, in connection with other multiemployer plans not discussed above.

The increase in plan contributions in 2022 is mainly due to higher payroll levels as a result of recovery from the COVID-19 pandemic.

Benefit plan contributions are included in operating expenses in our consolidated statements of operations.

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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.

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June 15, 2022 June 30, 2022 $ 0.035

June 19, 2020 June 30, 2020 $ 0.105

March 15, 2022 March 31, 2022 $ 0.035

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June 15, 2021 June 30, 2021 $ 0.035

June 19, 2020 June 30, 2020 $ 0.105

March 16, 2020 March 31, 2020 $ 0.105

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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 are authorized for issuance under awards granted pursuant to the 2019 Plan, and as of December 31, 2021, approximately 7.7 million shares of ESRT common stock remain available for future issuance under the Plans.

In March 2021, we made grants of LTIP units to executive officers under the 2019 Plan.

At such time, we granted to executive officers a total of 364,199 LTIP units that are subject to time-based vesting and 1,007,156 LTIP units that are subject to market-based vesting, with fair market values of $ 3.4 million for the time-based vesting awards and $ 6.9 million for the market-based vesting awards.

In March 2021, we made grants of LTIP units and restricted stock to certain other employees under the 2019 Plan.

At such time, we granted to certain other employees a total of 128,419 LTIP units and 113,333 shares of restricted stock that are subject to time-based vesting and 192,760 LTIP units that are subject to market-based vesting, with fair market values of $ 2.7 million for the time-based vesting awards and $ 1.5 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 the grantee's

continued employment.

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

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, 2021.

Following the completion of the three-year performance period, 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 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 the grantee's continued employment on those dates.

An aggregate of 11.0 million shares of ESRT common stock are authorized for issuance under awards granted pursuant to the

2019 Plan, and as of December 31, 2022, approximately 6.3 million shares of ESRT common stock remain available for future issuance under the Plans.

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 46,168 LTIP units that are subject to time-based vesting and we granted to certain other employees 85,409 LTIP units and 7,562 restricted stock that are subject to time-based vesting, with fair market values of $ 1.5 million.

These awards are subject to time-based vesting and vest over five years from January 1, 2021, subject generally to the grantee's continued employment.

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.

For awards granted in 2021, our named executive officers can 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 120 % of such face amount.

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.

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

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

In 2021, 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 (i) in cash at the face value of the award, (ii) in immediately vesting equity at the face value of the award, or (iii) in equity vesting ratably over three years at 120 % of the face amount.

Annually, we also 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 126,713 LTIP units that are subject to time-based vesting with fair market values of $ 1.4 million and no restricted shares.

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.

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 $ 0.08 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.

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.

Prior to amendment of the 2019 Plan on July 13, 2020, an employee is retirement eligible when the employee attains the (i) age of 60 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 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.

For the market-based LTIP units, the fair value of the awards was estimated using a Monte Carlo Simulation model.

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.

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.

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.

Our stock price, along with the prices of the comparative indexes, is assumed to follow the Geometric Brownian Motion Process.

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 restricted stock awards that are time-based, we estimate the stock compensation expense based on the fair value of the stock at the grant date.

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, 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 year ended December 31, 2022, 2021 and 2020 were valued at $ 22.4 million, $ 20.0 million and $ 28.3 million, respectively.

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The 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 2.60 %, a risk-free interest rate from 0.12 % to 0.32 %, and an expected price volatility from 36.0 % to 53.0 %.

The per unit or share granted in 2020 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 %.The per unit or share granted in 2021 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 2.60 %, a risk-free interest rate from 0.12 % to 0.32 %, and an expected price volatility from 36.0 % to 53.0 %.

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

ESRT Restricted Stock LTIP Units Weighted Average Grant Fair Value

ESRT 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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The total fair value of LTIP units and restricted stock that vested during 2022, 2021 and 2020 was $ 14.1 million, $ 12.3 million and $ 15.6 million, respectively.

The LTIP unit and ESRT restricted stock award agreements will immediately vest when a grantee attains the (i) age of 60 or 65 , as applicable, and (ii) the date on which the 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 $ 1.3 million, $ 2.6 million and $ 2.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The time-based LTIPs and 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 the 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 $ 2.3 million, $ 1.3 million and $ 2.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Unrecognized compensation expense was $ 0.8 million at December 31, 2022, which will be recognized over a weighted average period of 3.1 years.

For the remainder of the LTIP unit and ESRT restricted stock awards, we recognized noncash compensation expense ratably over the vesting period, and accordingly, we recognized $ 19.0 million, $ 22.9 million and $ 18.8 million in noncash compensation expense for the years ended December 31, 2021, 2020 and 2019, respectively.

For the remainder of the LTIP unit awards, we recognized noncash compensation expense ratably over the vesting period, and accordingly, we recognized $ 18.7 million, $ 19.0 million and $ 22.9 million in noncash compensation expense for the years ended December 31, 2022, 2021 and 2020, respectively.

Unrecognized compensation expense was $ 25.2 million at December 31, 2022, which will be recognized over a weighted average period of 2.4 years.

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Private perpetual preferred unit distributions ( 4,201 ) ( 4,201 ) ( 4,197 )

Net income attributable to non-controlling interests in other partnerships 243 — —

Earnings allocated to unvested shares — ( 340 ) ( 985 )

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Related Party Transactions

Sale of Westport Retail Properties

On February 1 2023, we closed on the disposition of our retail assets located at 69-97 and 103-107 Main Street in Westport, Connecticut, for total consideration of $ 40.0 million, to an entity affiliated with our Chairman, President and Chief Executive Officer, Anthony E.

Malkin (the “Westport Transaction”).

The Company determined to make the sale to the related party entity after a marketed sale process conducted from February 2022 through August 2022 through a broker in which it received several third-party bids.

Deals with third party purchasers failed to materialize due to adverse changes in capital market conditions during that time.

The Westport Transaction materialized due to timing because the related party entity had recently completed a sale of property and was in the market for exchange property to defer tax in a 1031 exchange, and the Company recently executed on the acquisition of 298 Mulberry Street.

The $ 40.0 million valuation for the Westport Transaction is in the range of the bids the Company received during the marketed sale process.

In connection with the Westport Transaction, we advanced a loan to the buyer to facilitate closing with a maximum principal amount of up to $ 1.0 million, which bears interest at SOFR plus 3.5 % and requires repayment of principal to the extent of available cash flow of the property.

We anticipate that the loan will be fully repaid within one year.

Post-sale, we will provide certain supervisory and property management services to the buyer on similar terms as those we provide to our other excluded properties.

See “– Excluded Properties and Businesses” below.

The Company has a written Related Party Transactions Policy (the “Policy”) which requires the Nominating and Corporate Governance Committee to review the material facts of all related party transactions and consider all relevant factors in approving any related party transaction.

Further, the Policy provides that a director or executive officer shall not participate in any consideration, discussion or approval of such related party transaction in which he or she is a related party.

The Westport Transaction process was completed in compliance with the Policy.

The independent members of the Nominating and Corporate Governance Committee conducted an independent review under the guidance of outside counsel and then approved the transaction.

The Company reviewed with outside counsel best practices for the specific Westport Transaction and took additional precautions to ensure an arms-length process.

There were separate counsels and appraisals for both buyer and seller.

Tax Protection Agreements

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Malkin and Isabel W.

Malkin, who are 88 and 85 years old, respectively, for the three other protected assets, Metro Center, 10 Bank Street and 1542 Third Avenue, unless:

Malkin, who are 89 and 86 years old, respectively, for the three other protected assets, Metro Center, 298 Mulberry Street (“substituted basis property” as contemplated by the tax protection agreement for 10 Bank Street, which was sold on December 7, 2022) and 1542 Third Avenue, unless:

(1) Anthony E.

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Because we expect that we will at all times have sufficient liabilities to allow us to meet our obligations to allocate liabilities to our partners that are protected parties under the tax protection agreement, our indemnification obligation with respect to “certain tax liabilities” would generally arise only in the event that we dispose in a taxable transaction of a protected asset within the period specified above in a taxable transaction.

In the event of such a disposition, the amount of our indemnification obligation would depend on several factors, including the amount of “built-in gain,” if any, recognized and allocated to the indemnified partners with respect to such disposition and the effective tax rate to be applied to such gain at the time of such disposition.

time of such disposition.

Our disposition of the 10 Bank Street asset on December 7, 2022 did not trigger any obligation of payment pursuant to the tax protection agreement.

Our partnership agreement requires that allocations with respect to such acquired property be made in a manner consistent with Section 704(c) of the Code.

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In connection therewith, we have filed, and are obligated to maintain the effectiveness of, an automatically effective shelf registration statement, along with a prospectus supplement, with respect to, among other things, shares of ESRT Class A common stock that may be issued upon redemption of operating partnership units or issued upon conversion of shares of ESRT Class B common stock to continuing investors in the public existing entities.

Pursuant to the registration rights agreement, under certain circumstances, ESRT will also be required to undertake an underwritten offering upon the written request of the Malkin Group, which we refer to as the holder, provided (i) the registrable shares to be registered in such offering will have a market value of at least $ 150.0 million, (ii) ESRT will not be obligated to effect more

than two underwritten offerings during any 12-month period;

and (iii) the holder will not have the ability to effect more than four underwritten offerings.

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In addition, ESRT entered into change in control severance agreements with Thomas P.

Durels, Thomas N.

and Christina Chiu.

Durels and Christina Chiu.

Indemnification of Our Directors and Officers

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Malkin and Peter L.

Malkin control the general partners or managers of, the entities that own interests in nine multi-family properties and five net leased retail properties, (including one single tenant retail property in Greenwich, Connecticut).

Malkin control the general partners or managers of, the entities that own interests in eight multi-family properties and five net leased retail properties, (including one single tenant retail property in Greenwich, Connecticut).

The Malkin Group also owns non-controlling interests in one Manhattan office property, two Manhattan retail properties and several retail properties outside of Manhattan, none of which were contributed to us in the formation transactions.

Additionally, in February 2023, ESRT sold its two retail properties in Westport, Connecticut to an entity controlled by the Malkin Group (see Sale of Westport Retail Properties above).

We refer to the non-controlling interests described above collectively as the excluded properties.

In addition, the Malkin Group owns interests in one mezzanine and senior equity fund and five property managers, and which we refer to collectively as the excluded businesses.

Other than the Greenwich retail property, we do not believe that the excluded properties or the excluded businesses are consistent with our portfolio geographic or property type composition, management or strategic direction.

In addition, the Malkin Group owns interests in one mezzanine (which was repaid in full on December 6, 2022) and senior equity fund and four property managers, and which we refer to collectively as the excluded businesses.

We do not believe that the excluded properties or the excluded businesses are consistent with our commercial portfolio geographic or property type composition, management or strategic direction.

Pursuant to management and/or service agreements with the owners of interests in those excluded properties and services agreements with five residential property managers and the managers of certain other excluded businesses which historically were managed by affiliates of our predecessor, we are designated as the asset manager (supervisor) and/or property manager of the excluded properties and will provide services to the owners of certain of the excluded properties and the five residential property managers and provide services and access to office space to the existing managers of the other excluded businesses.

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ESRT's management of the excluded properties and provision of services to the five residential property managers and the existing managers of the other excluded businesses represent a minimal portion of our overall business.

There is no established time period in which we will manage such properties or provide services to the owners of certain of the excluded properties and the five residential property

managers and provide services and access to office space to the existing managers of the other excluded businesses;

There is no established time period in which we will manage such properties or provide services to the owners of certain of the excluded properties and the five residential property managers and provide services and access to office space to the existing managers of the other excluded businesses;

Malkin and Anthony E.

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If we were to attempt any such acquisition, we anticipate that Anthony E.

Malkin, ESRT's Chairman and Chief Executive Officer, will not participate in the negotiation process on our behalf with respect to our potential acquisition of any of these excluded properties or businesses, and the approval of a majority of ESRT's independent directors will be required to approve any such acquisition.

Malkin, ESRT's Chairman, President and Chief Executive Officer, will not participate in the negotiation process on our behalf with respect to our potential acquisition of any of these excluded properties or businesses, and the approval of a majority of ESRT's independent directors will be required to approve any such acquisition.

Services are and were provided by us to excluded properties and businesses.

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Malkin, our chairman emeritus and employee, utilizing approximately 15 % of the space, for which we pay to such tenant an allocable pro rata share of the cost.

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

We also have agreements with these entities and excluded

properties and businesses to provide them with general computer-related support services.

Total revenue aggregated $ 0.3 million, $ 0.3 million and $ 0.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

TRS Holdings and observatory TRS are taxable entities and their consolidated provision for income taxes consisted of the following for the years ended December 31, 2021, 2020 and 2019 (amounts in thousands):

Holdings TRS and Observatory TRS are taxable entities and their consolidated provision for income taxes consisted of the following for the years ended December 31, 2022, 2021 and 2020 (amounts in thousands):

For the Year Ended December 31,

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Total deferred ( 1,000 ) 2,347 ( 660 )

Income tax benefit (expense) $ 1,734 $ 6,971 $ ( 2,429 )

In December 2017, the Tax Cuts and Jobs Act (the “TCJA”) was enacted.

The TCJA includes a number of changes to existing U.S.

tax laws, most notably a reduction of the U.S.

corporate income tax rate from 35 percent to 21 percent, effective January 1, 2018.

Income tax (expense) benefit $ ( 1,546 ) $ 1,734 $ 6,971

In March 2020, the Coronavirus Aid, Relief, Economic Security (“CARES”) Act was enacted.

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Many states, including New York, have not adopted the NOL provisions of the CARES Act and continue to have their own rules with respect to the application of NOLs.

The carryback of observatory TRS’s NOL to previous tax years resulted in a 13 % increase of U.S.

For the year ended December 31, 2020, the carryback of Observatory TRS’s NOL to previous tax years resulted in a 13 % increase of U.S.

corporation income tax benefit.

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This receivable reflects an anticipated refund resulting from the carryback of 2020 NOL to previous tax years.

The observatory TRS had $ 3.1 million NOL carryforwards that may be used to offset future taxable income, if any.

The Observatory TRS has $ 10.2 million of NOL carryforwards that may be used to offset future taxable income, if any.

The federal NOL may be carried forward indefinitely and the state and local NOL can be carried forward for up to 20 years.

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The effective income tax rate is 33.6 %, 26.0 % and 47.0 % for the years ended December 31, 2022, 2021 and 2020, respectively.

The actual tax provision differed from that computed at the federal statutory corporate rate as follows (amounts in thousands):

The actual tax provision differed from that computed at the federal statutory corporate rate as follows (amounts in

For the Year Ended December 31,

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Corporate income tax rate adjustment — — 2,048

Income tax benefit (expense) $ 1,734 $ 6,971 $ ( 2,429 )

Income tax (expense) benefit $ ( 1,546 ) $ 1,734 $ 6,971

The income tax effects of temporary differences that give rise to deferred tax assets are presented below as of December 31, 2022, 2021 and 2020 (amounts in thousands):

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New York City net operating loss carryforward credit 233 704 334

Other deferred tax assets 261 — —

Deferred tax assets $ 2,248 $ 3,092 $ 590

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(1) real estate and (2) observatory.

Our real estate segment includes all activities related to the ownership, management, operation, acquisition, repositioning and disposition of our real estate assets.

Our real estate segment includes all activities related to the ownership, management, operation, acquisition, redevelopment, repositioning and disposition of our traditional real estate assets.

Our observatory segment operates the 86th and 102nd floor observatories at the Empire State Building.

These two lines of

We account for intersegment sales and rents as if the sales or rents were to third parties, that is, at current market prices.

Asset information by segment is not reported because we do not use this measure to assess performance or make decisions to allocate resources.

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 profit for each segment for the years ended December 31, 2022, 2021 and 2020 (amounts in thousands):

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Real estate taxes 123,057 — — 123,057

Impairment charge 7,723 — — 7,723

Depreciation and amortization 216,707 187 — 216,894

Total operating expenses 568,790 96,228 ( 65,005 ) 600,013

Total operating income (loss) 84,270 ( 5,137 ) — 79,133

Total operating income 117,278 9,750 — 127,028

Other income (expense):

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Interest expense ( 101,206 ) — — ( 101,206 )

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

Loss before income taxes ( 9,535 ) ( 5,236 ) — ( 14,771 )

Income tax (expense) benefit ( 613 ) 2,347 — 1,734

Net loss $ ( 10,148 ) $ ( 2,889 ) $ — $ ( 13,037 )

Gain on sale/disposition of properties 33,988 — — 33,988

Income before income taxes 54,961 9,797 — 64,758

Income tax expense ( 584 ) ( 962 ) — ( 1,546 )

Net income $ 54,377 $ 8,835 $ — $ 63,212

Segment assets $ 3,909,299 $ 254,295 $ — $ 4,163,594

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Real estate taxes 119,967 — — 119,967

Impairment charges 6,204 — — 6,204

Impairment charge 7,723 — — 7,723

Depreciation and amortization 201,676 130 — 201,806

Total operating expenses 521,625 46,749 ( 23,413 ) 544,961

Total operating income

71,297 ( 12,636 ) — 58,661

Total operating income (loss) 84,270 ( 5,137 ) — 79,133

Other income (expense):

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

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

Income before income taxes ( 17,319 ) ( 12,541 ) — ( 29,860 )

Income tax expense ( 843 ) 7,814 — 6,971

Net income $ ( 18,162 ) $ ( 4,727 ) $ — $ ( 22,889 )

Loss before income taxes ( 9,535 ) ( 5,236 ) — ( 14,771 )

Income tax (expense) benefit ( 613 ) 2,347 — 1,734

Net loss $ ( 10,148 ) $ ( 2,889 ) $ — $ ( 13,037 )

Segment assets $ 4,037,122 $ 245,325 $ — $ 4,282,447

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Real estate taxes 121,923 — — 121,923

Impairment charges 6,204 — — 6,204

Depreciation and amortization 190,863 143 — 191,006

Total operating expenses 526,701 41,693 ( 17,827 ) 550,567

Total operating income

142,203 12,503 — 154,706

Total operating income (loss) 71,297 ( 12,636 ) — 58,661

Other income (expense):

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Interest expense ( 89,907 ) — — ( 89,907 )

Income before income taxes 74,216 12,503 — 86,719

Income tax expense ( 896 ) ( 1,533 ) — ( 2,429 )

Net income $ 73,320 $ 10,970 $ — $ 84,290

Loss on early extinguishment of debt ( 86 ) — — ( 86 )

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

Loss before income taxes ( 17,319 ) ( 12,541 ) — ( 29,860 )

Income tax (expense) benefit ( 843 ) 7,814 — 6,971

Net loss $ ( 18,162 ) $ ( 4,727 ) $ — $ ( 22,889 )

Segment assets $ 3,903,884 $ 246,811 $ — $ 4,150,695

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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.

The $ 7.7 million and $ 6.2 million write-offs are shown as impairment charges in the consolidated statement of operations for the years ended December 31, 2021 and 2020, respectively.

The $ 7.7 million and $ 6.2 million write-offs

are shown as impairment charges in the consolidated statement of operations for the years ended December 31, 2021 and 2020, respectively.

Subsequent Events

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One Station Place, Stamford, CT (Metro Center) office 82,596 5,313 28,602 36,575 n/a 5,313 65,177 70,490 37,901 1987 1984 various

383 Main Avenue, Norwalk, CT (1) office 29,692 2,262 12,820 6,582 n/a 1,679 19,985 21,664 — 1985 1994 various

500 Mamaroneck Avenue, Harrison, NY office — 4,571 25,915 27,053 n/a 4,571 52,968 57,539 28,856 1987 1999 various

10 Bank Street, White Plains, NY office 30,719 5,612 31,803 20,191 n/a 5,612 51,994 57,606 26,841 1989 1999 various

10 Union Square, New York, NY retail 50,000 5,003 12,866 5,574 n/a 5,003 18,440 23,443 9,444 1987 1996 various

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103-107 Main Street, Westport, CT (1) retail — 1,243 7,043 371 n/a 1,260 7,397 8,657 3,184 1900 2006 various

345 E 94th Street NY (2) Multifamily 49,421 44,228 55,766 19 n/a 44,228 55,785 100,013 — 2000 2021 various

Victory 561 10th Ave NY (2) Multifamily 126,338 91,437 124,997 28 n/a 91,437 125,025 216,462 — 2004 2021 various

345 E 94th Street NY multi-family 51,465 44,228 55,766 1,044 n/a 44,228 56,811 101,039 1,698 2000 2021 various

Victory 561 10th Ave NY multi-family 131,915 91,437 124,997 804 n/a 91,437 125,801 217,238 3,713 2004 2021 various

298 Mulberry, New York, NY multi-family — 40,935 69,509 514 n/a 41,126 69,832 110,958 — 1986 2022 various

Property for development at the Transportation Hub in Stamford, CT land — 4,541 — 8,167 n/a 12,708 — 12,708 — n/a n/a n/a

Totals $ 900,630 $ 363,441 $ 1,097,752 $ 2,090,256 $ — $ 373,706 $ 3,177,743 $ 3,551,449 $ 1,137,267

1 Property written down to fair value in December 31, 2021.

2 Property acquired on December 22, 2021.

1 Property sold on February 1, 2023

Empire State Realty OP, L.P.

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Improvements 79,070 89,426 104,060

Property classified as held for sale ( 61,965 ) — —

Disposals ( 77,017 ) ( 38,903 ) ( 79,527 )

6 unchanged sentences

Depreciation expense 179,872 162,667 158,605

Property classified as held for sale ( 30,315 ) — —

Disposals ( 85,228 ) ( 31,341 ) ( 79,527 )

5 unchanged sentences

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 9A. Controls and Procedures