What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-04 compared with 2022-11-03 · 185 added, 247 removed, 560 unchanged (44% of the section changed)

3 unchanged sentences

(amounts in thousands, except per unit amounts)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

ASSETS (unaudited)

6 unchanged sentences

Commercial real estate properties, net 2,390,367 2,414,182

Assets held for sale 35,980 35,538

Cash and cash equivalents 272,648 264,434

18 unchanged sentences

Tenants’ security deposits 35,111 25,084

Liabilities related to assets held for sale 6,862 5,943

Total liabilities 2,480,297 2,480,503

10 unchanged sentences

Series ES operating partnership units ( 20,684 and 21,081 limited partner operating partnership units outstanding in 2023 and 2022, respectively)

470 ( 4,058 )

Series 60 operating partnership units ( 5,503 and 5,558 limited partner operating partnership units outstanding in 2023 and 2023, respectively)

( 223 ) ( 1,395 )

Series 250 operating partnership units ( 2,717 and 2,789 limited partner operating partnership units outstanding in 2023 and 2022, respectively)

( 57 ) ( 692 )

Total Empire State Realty OP, L.P.'s capital 1,662,006 1,667,625

6 unchanged sentences

(amounts in thousands, except per unit amounts)

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

2022 2021 2022 2021

Three Months Ended March 31,

Rental revenue $ 140,091 $ 147,514

13 unchanged sentences

Total operating income

35,527 13,203 88,074 58,036

Other income (expense):

1 unchanged sentence

Interest expense ( 25,304 ) ( 25,014 )

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

Gain on disposition of property — — 27,170 —

Gain on sale of property 15,696 —

Income (loss) before income taxes 10,475 ( 18,817 )

Income tax (expense) benefit ( 1,457 ) ( 20 ) ( 224 ) 3,271

Income tax benefit 1,219 1,596

Net income (loss) 11,694 ( 17,221 )

13 unchanged sentences

(amounts in thousands)

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

2022 2021 2022 2021

Three Months Ended March 31,

Net income (loss) $ 11,694 $ ( 17,221 )

2 unchanged sentences

amount reclassified into interest expense ( 1,272 ) 3,294

Other comprehensive income 20,980 2,817 46,835 8,548

Other comprehensive income (loss) ( 6,674 ) 13,057

Comprehensive income (loss) 5,020 ( 4,164 )

Net loss attributable to non-controlling interest in other partnerships 43 63

Other comprehensive income attributable to non-controlling interest ( 670 ) — ( 2,297 ) —

Other comprehensive loss attributable to non-controlling interest 381 —

Comprehensive income (loss) attributable to OP unitholders $ 5,444 $ ( 4,101 )

2 unchanged sentences

Condensed Consolidated Statements of Capital

For The Three Months Ended September 30, 2022 and 2021

(amounts in thousands)

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

General Partner Limited Partners

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

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

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

Conversion of operating partnership units to ESRT Partner's Capital

— — 461 39 ( 39 ) ( 4 ) ( 324 ) ( 27 ) ( 60 ) ( 5 ) ( 38 ) ( 3 ) — —

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

Repurchases of common shares — — ( 2,567 ) ( 18,105 ) — — — — — — — — — ( 18,105 )

Equity compensation — — ( 8 ) 317 — 5,057 — — — — — — — 5,374

Distributions — ( 1,050 ) — ( 5,694 ) — ( 2,837 ) — ( 751 ) — ( 199 ) — ( 100 ) — ( 10,631 )

Net income — 1,050 — 5,557 — 2,529 — 739 — 192 — 100 ( 49 ) 10,118

Other comprehensive income (loss) — — — 12,462 — 5,553 — 1,646 — 426 — 223 670 20,980

Balance at September 30, 2022 6,224 $ 29,940 161,570 $ 952,379 81,034 $ 675,818 21,422 $ 470 5,678 $ ( 223 ) 2,824 $ ( 57 ) $ 15,502 $ 1,673,829

General Partner Limited Partners

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

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

Conversion of operating partnership units to ESRT Partner's Capital

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

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

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

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

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

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

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

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

Empire State Realty OP, L.P.

Condensed Consolidated Statements of Capital

For The Nine Months Ended September 30, 2022 and 2021

For The Three Months Ended March 31, 2023 and 2022

(amounts in thousands)

11 unchanged sentences

Other comprehensive income — — — ( 3,839 ) — ( 1,762 ) — ( 497 ) — ( 132 ) — ( 63 ) ( 381 ) ( 6,674 )

Balance at September 30, 2022 6,224 $ 29,940 161,570 $ 952,379 81,034 $ 675,818 21,422 $ 470 5,678 $ ( 223 ) 2,824 $ ( 57 ) $ 15,502 $ 1,673,829

Balance at March 31, 2023 6,224 $ 29,940 161,329 $ 948,251 81,712 $ 682,972 20,684 $ 925 5,503 $ ( 94 ) 2,717 $ 12 $ 15,060 $ 1,677,066

4 unchanged sentences

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

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

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

3 unchanged sentences

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

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

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

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

2 unchanged sentences

(amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows From Operating Activities

2 unchanged sentences

Depreciation and amortization 47,408 67,106

Gain on disposition of property ( 27,170 ) —

Gain on sale of property ( 15,696 ) —

Amortization of non-cash items within interest expense 2,238 14,593

3 unchanged sentences

Equity based compensation 4,374 4,460

Loss on early extinguishment of debt — 214

Increase (decrease) in cash flows due to changes in operating assets and liabilities:

7 unchanged sentences

Cash Flows From Investing Activities

Net proceeds from sale of property 39,137 —

Development costs ( 12 ) ( 31 )

5 unchanged sentences

(amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows From Financing Activities

Repayment of mortgage notes payable ( 2,142 ) ( 2,092 )

Deferred financing costs — ( 7,559 )

Contributions from consolidated joint ventures — 224

21 unchanged sentences

Conversion of operating partnership units to ESRT partner's capital 2,544 1,497

Disposal of land in connection with foreclosure 1,680 —

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

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

7 unchanged sentences

(“ESRT”), a self-administered and self-managed real estate investment trust ("REIT"), conducts all of its business and owns (either directly or through subsidiaries) substantially all of its assets.

We own and manage a well-positioned property portfolio of office, retail and multifamily assets in Manhattan and the greater New York metropolitan area.

We own, manage, operate, acquire and reposition office, retail and multifamily assets in Manhattan and the greater New York metropolitan area.

As the owner of the Empire State Building, the World’s Most Famous Building, ESRT also owns and operates its iconic, newly reimagined Observatory Experience.

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

As of March 31, 2023, our office and retail portfolio contained 9.6 million rentable square feet of office and retail space.

We owned 12 office properties (including three long-term ground leasehold interests) encompassing approximately 8.9 million rentable square feet of office space.

Nine of these properties are located in the midtown Manhattan market and 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 approximately 0.5 million rentable square feet of retail space on their ground floor and/or contiguous levels.

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

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

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

Our remaining three office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing in the aggregate approximately 1.3 million rentable square feet.

The majority of 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.

As of September 30, 2022, our portfolio included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing approximately 0.2 million rentable square feet in the aggregate.

Additionally, at September 30, 2022, our portfolio included two multifamily properties totaling 625 units.

As of March 31, 2023, our portfolio included four standalone retail properties located in Manhattan encompassing approximately 0.2 million rentable square feet in the aggregate.

Additionally, as of March 31, 2023, our portfolio included three multifamily properties located in Manhattan totaling 721 units.

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

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

As of September 30, 2022, ESRT owned approximately 59.3 % of our operating partnership units.

ESRT's Class A common stock, par value $ 0.01 per share, is listed on the New York Stock Exchange under the symbol "ESRT." ESRT, as the sole general partner in our company, has responsibility and discretion in the management and control of our company, and our limited partners, in such capacity, have no authority to transact business for, or participate in the management activities, of our company.

As of March 31, 2023, ESRT owned approximately 59.3 % of our operating partnership units.

Summary of Significant Accounting Policies

6 unchanged sentences

These financial statements should be read in conjunction with the financial statements and accompanying notes included in the financial statements for the year ended December 31, 2022 contained in our Annual Report on Form 10-K.

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

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

Our observatory business is subject to seasonality based on tourism trends and the weather.

Pre-pandemic, approximately 16.0 % to 18.0 % of our annual observatory revenue was realized in the first quarter, 26.0 % to 28.0 % was realized

in the second quarter, 31.0 % to 33.0 % was realized in the third quarter, and 23.0 % to 25.0 % was realized in the fourth quarter.

Our multifamily business experiences some seasonality based on general market trends in New York City – the winter months (November through January) are slower in terms of lease activity.

We seek to mitigate this by staggering lease terms such that lease expirations are matched with seasonal demand.

We do not consider the balance of our business to be subject to material seasonal fluctuations.

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

3 unchanged sentences

The primary beneficiary is required to consolidate the VIE.

We had no VIEs as of September 30, 2022 and December 31, 2021.

As of March 31, 2023, we had a variable interest in and are deemed to be the primary beneficiary of 298 Mulberry, the multifamily asset we acquired in December 2022.

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

9 unchanged sentences

Actual results could differ from those estimates.

Property Disposition

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

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

Subsequent to September 30, 2022, we entered into agreements to sell 500 Mamaroneck Avenue in Harrison, NY and 10 Bank Street in White Plains, NY at a gross asset valuation of $ 95.0 million.

These transactions are expected to close in the first quarter of 2023, subject to customary closing conditions.

Acquisitions and Dispositions

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

The assets and related liabilities of the 500 Mamaroneck property are classified as held for sale in our condensed consolidated balance sheet as of March 31, 2023 and December 31, 2022 having met the held for sale criteria set forth in ASC 360 Property, Plant, and Equipment.

Subsequent to March 31, 2023, we closed on the sale of this property on April 5, 2023.

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, and recorded a gain of $ 15.7 million, which is included in Gain on sale of property in our consolidated statement of operations.

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

See our Annual Report on Form 10-K for the year ended December 31, 2022 for more information.

Deferred Costs, Acquired Lease Intangibles and Goodwill

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

September 30, 2022 December 31, 2021

Deferred costs, net, consisted of the following as of March 31, 2023 and December 31, 2022 (amounts in thousands):

March 31, 2023 December 31, 2022

Leasing costs $ 220,988 $ 218,707

4 unchanged sentences

Total deferred costs, net, excluding net deferred financing costs $ 179,427 $ 183,977

At September 30, 2022 and December 31, 2021, $ 5.5 million and $ 7.2 million, respectively, of net deferred financing costs associated with the unsecured revolving credit facility was included in deferred costs, net on the condensed consolidated balance sheets.

Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $ 5.6 million and $ 10.4 million for the three months ended September 30, 2022 and 2021, respectively, and $ 19.8 million and $ 22.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Amortization expense related to acquired lease intangibles was $ 2.2 million and $ 5.0 million for the three months ended September 30, 2022 and 2021, respectively, and $ 10.6 million and $ 8.3 million for the nine months ended September 30, 2022 and 2021, respectively.

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

September 30, 2022 December 31, 2021

At March 31, 2023 and December 31, 2022, $ 4.4 million and $ 5.0 million, respectively, of net deferred financing costs associated with the unsecured revolving credit facility was included in deferred costs, net on the condensed consolidated balance sheets.

Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $ 5.8 million and $ 7.0 million for the three months ended March 31, 2023 and 2022, respectively.

Amortization expense related to acquired lease intangibles was $ 2.4 million and $ 4.2 million for the three months ended March 31, 2023 and 2022, respectively.

Amortizing acquired intangible assets and liabilities consisted of the following as of March 31, 2023 and December 31, 2022 (amounts in thousands):

March 31, 2023 December 31, 2022

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

1 unchanged sentence

Acquired below-market ground leases, net $ 327,115 $ 329,073

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Acquired below-market leases $ ( 64,656 ) $ ( 64,656 )

1 unchanged sentence

Acquired below-market leases, net $ ( 16,581 ) $ ( 17,849 )

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $ 0.7 million and $ 4.2 million for the three months ended September 30, 2022 and 2021, respectively, and $ 4.1 million and $ 5.6 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, we had goodwill of $ 491.5 million.

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $ 0.7 million and $ 1.8 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023 and December 31, 2022, we had goodwill of $ 491.5 million.

Goodwill was allocated $ 227.5 million to the observatory reportable segment and $ 264.0 million to the real estate reportable segment.

From the quarter ended June 30, 2020 through the quarter ended June 30, 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.

From the quarter ended June 30, 2020 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 temporary closure of our observatory due to the COVID-19 pandemic and subsequent slow increase in visitors due to continued pandemic-related restrictions impacting tourism and international travel.

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).

2 unchanged sentences

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

For the quarter ended September 30, 2022, we performed an optional qualitative assessment and did not identify any events which occurred between our last quantitative assessment and the current reporting date which would indicate, on a more likely than not basis, that the goodwill allocated to the reporting unit was impaired.

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.

For the quarter ended March 31, 2023, we performed an optional qualitative assessment and did not identify any events which occurred between our last quantitative assessment and the current reporting date which would indicate, on a more likely than not basis, that the goodwill allocated to the reporting unit was impaired.

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.

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

Principal Balance As of September 30, 2022

September 30, 2022 December 31, 2021 Stated

Debt consisted of the following as of March 31, 2023 and December 31, 2022 (amounts in thousands):

Principal Balance As of March 31, 2023

March 31, 2023 December 31, 2022 Stated

Rate Effective

8 unchanged sentences

250 West 57th Street 180,000 180,000 2.83 % 3.21 % 12/1/2030

10 Bank Street 30,364 31,091 4.23 % 4.37 % 6/1/2032

383 Main Avenue (4)

— 30,000 — % — % —

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

30 unchanged sentences

______________

(1) The effective rate is the yield as of September 30, 2022 and includes the stated interest rate, deferred financing cost amortization and interest associated with variable to fixed interest rate swap agreements.

(1) The effective rate is the yield as of March 31, 2023 and includes the stated interest rate, deferred financing cost amortization and interest associated with variable to fixed interest rate swap agreements.

(2) Pre-payment is generally allowed for each loan upon payment of a customary pre-payment penalty.

(3) Represents a $ 164 million mortgage loan bearing interest at 4.09 % and a $ 14.1 million loan bearing interest at 6.25 %.

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

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

(6) 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.

(4) At March 31, 2023, we were in compliance with all debt covenants.

Principal Payments

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

Aggregate required principal payments at March 31, 2023 are as follows (amounts in thousands):

Year Amortization Maturities Total

7 unchanged sentences

Deferred Financing Costs

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

September 30, 2022 December 31, 2021

Deferred financing costs, net, consisted of the following at March 31, 2023 and December 31, 2022 (amounts in thousands):

March 31, 2023 December 31, 2022

Financing costs $ 43,473 $ 43,473

1 unchanged sentence

Total deferred financing costs, net $ 15,631 $ 16,720

Amortization expense related to deferred financing costs was $ 1.2 million and $ 1.1 million for the three months ended September 30, 2022 and 2021, respectively, and $ 3.8 million and $ 3.4 million for the nine months ended September 30, 2022 and 2021, respectively.

Amortization expense related to deferred financing costs was $ 1.1 million and $ 1.4 million for the three months ended March 31, 2023 and 2022, respectively.

Unsecured Revolving Credit and Term Loan Facilities

1 unchanged sentence

The BofA Credit Facility is in the initial maximum principal amount of up to $ 1.065 billion, which consists of an $ 850.0 million revolving credit facility that matures on March 31, 2025, and a $ 215.0 million term loan facility that matures on March 19, 2025.

As of September 30, 2022 , we had no borrowings under the revolving credit facility and $ 215.0 million under the term loan facility.

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 March 31, 2023 , we had no borrowings under the revolving credit facility and $ 215.0 million under the term loan facility.

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 $ 175.0 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 September 30, 2022 , our borrowings amounted to $ 175.0 million under the Wells Term Loan Facility.

As of March 31, 2023 , 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.

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

The agreements governing both facilities also contain customary events of default (subject in certain cases to specified cure periods), including but not limited to non-payment, breach of covenants, representations or warranties, cross defaults, bankruptcy or other insolvency events, judgments, ERISA events, invalidity of

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

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

Both facilities also require compliance with financial ratios including a maximum leverage ratio, a

maximum secured leverage ratio, a minimum fixed charge coverage ratio, a minimum unencumbered interest coverage ratio, and a maximum unsecured leverage ratio.

As of March 31, 2023, we were in compliance with these covenants.

Senior Unsecured Notes

2 unchanged sentences

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

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

As of March 31, 2023, we were in compliance with these covenants.

Accounts Payable and Accrued Expenses

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

September 30, 2022 December 31, 2021

Accounts payable and accrued expenses consisted of the following as of March 31, 2023 and December 31, 2022 (amounts in thousands):

March 31, 2023 December 31, 2022

Accrued capital expenditures $ 39,982 $ 44,293

2 unchanged sentences

Accrued interest payable 3,558 3,509

Due (from) to affiliated companies ( 531 ) 1,131

Due to affiliated companies, net 1,572 —

Total accounts payable and accrued expenses $ 71,605 $ 80,729

6 unchanged sentences

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

In May 2022, we entered into forward interest rate swaps 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.

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

As of September 30, 2022, we did not have any derivatives in a net liability position.

As of September 30, 2022 and December 31, 2021, we had interest rate swaps and caps with an aggregate notional value of $ 576.3 million and $ 451.3 million, respectively.

As of March 31, 2023, the fair value of derivatives in a liability position, that includes accrued interest but excludes any adjustment for nonperformance risk, was $ 2.4 million.

If we had breached any of these provisions at March 31, 2023, we could have been required to settle our obligations under the agreements at their termination value of $ 2.4 million.

As of March 31, 2023 and December 31, 2022, we had interest rate swaps and caps with an aggregate notional value of $ 574.4 million and $ 574.8 million, respectively.

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

As of September 30, 2022, the fair value of our interest rate swaps amounted to $ 18.5 million, which is included in prepaid assets and other expenses on the condensed consolidated balance sheet.

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

As of March 31, 2023, the fair value of our interest rate swaps in an asset and liability position were $ 12.5 million and $( 2.2 ) million, respectively, and are included in prepaid expenses and other assets and in accounts payable and accrued expenses, respectively, on the condensed consolidated balance sheet.

As of December 31, 2022, the fair value of our derivative instruments in an asset position amounted to $ 17.9 million, which is included in prepaid expenses and other assets on the condensed consolidated balance sheet.

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

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

As of September 30, 2022 and 2021, our cash flow hedges are deemed highly effective and a net unrealized gain of $ 21.0 million and $ 2.8 million for the three months ended September 30, 2022 and 2021, respectively, and a net unrealized gain of $ 46.8 million and $ 8.5 million for the nine months ended September 30, 2022 and 2021, respectively, relating to both active and terminated hedges of interest rate risk, are reflected in the condensed consolidated statements of comprehensive income (loss).

Interest rate caps not designated as

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

As of March 31, 2023 and 2022, our cash flow hedges are deemed highly effective and a net unrealized gain (loss) of $( 6.7 ) million and $ 13.1 million for the three months ended March 31, 2023 and 2022, respectively, relating to both active and terminated hedges of interest rate risk, are reflected in the condensed consolidated statements of comprehensive income (loss).

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

We estimate that $ 3.3 million net loss of the current balance held in accumulated other comprehensive income (loss) will be reclassified into interest expense within the next 12 months.

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

September 30, 2022 December 31, 2021

We estimate that $ 5.3 million net gain of the current balance held in accumulated other comprehensive income (loss) will be reclassified into interest expense within the next 12 months.

The table below summarizes the terms of agreements and the fair values of our derivative financial instruments as of March 31, 2023 and December 31, 2022 (amounts in thousands):

March 31, 2023 December 31, 2022

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

Interest rate swap $ 265,000 1 Month LIBOR 2.1485 % August 31, 2017 August 24, 2022 $ — $ — $ — $ ( 3,184 )

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

12 unchanged sentences

$ 12,475 $ ( 2,171 ) $ 17,936 $ —

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

Three Months Ended Nine Months Ended

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

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on accumulated other comprehensive income (loss) for the three months ended March 31, 2023 and 2022 (amounts in thousands):

Three months ended

Effects of Cash Flow Hedges March 31, 2023 March 31, 2022

Amount of gain (loss) recognized in other comprehensive income (loss) $ ( 5,402 ) $ 9,763

Amount of loss reclassified from accumulated other comprehensive income (loss) into interest expense 1,272 ( 3,294 )

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

Three Months Ended Nine Months Ended

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

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on the condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022 (amounts in thousands):

Three months ended

Effects of Cash Flow Hedges March 31, 2023 March 31, 2022

Total interest expense presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded $ ( 25,304 ) $ ( 25,014 )

1 unchanged sentence

Fair Valuation

The estimated fair values at September 30, 2022 and December 31, 2021 were determined by management, using available market information and appropriate valuation methodologies.

The estimated fair values at March 31, 2023 and December 31, 2022 were determined by management, using available market information and appropriate valuation methodologies.

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

6 unchanged sentences

The fair values of our mortgage notes payable, senior unsecured notes - Series A, B, C, D, E, F, G and H - unsecured term loan facilities and unsecured revolving credit facility which are determined using Level 3 inputs are estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made by us.

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

September 30, 2022

The following tables summarize the carrying and estimated fair values of our financial instruments as of March 31, 2023 and December 31, 2022 (amounts in thousands):

March 31, 2023

Estimated Fair Value

1 unchanged sentence

Interest rate swaps included in prepaid expenses and other assets $ 12,446 $ 12,446 $ — $ 12,446 $ —

Interest rate swaps included in accounts payable and accrued expenses 2,171 2,171 — 2,171 —

Mortgage notes payable 882,142 787,481 — — 787,481

4 unchanged sentences

Value Total Level 1 Level 2 Level 3

Interest rate swap 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

1 unchanged sentence

Unsecured term loan facilities 388,773 390,000 — — 390,000

Disclosure about the fair value of financial instruments is based on pertinent information available to us as of September 30, 2022 and December 31, 2021.

Disclosure about the fair value of financial instruments is based on pertinent information available to us as of March 31, 2023 and December 31, 2022.

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

2 unchanged sentences

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

Operating expense reimbursements are reflected in our September 30, 2022 and 2021 condensed consolidated statements of operations as rental revenue.

Operating expense reimbursements are reflected in our March 31, 2023 and 2022 condensed consolidated statements of operations as rental revenue.

Rental revenue includes fixed and variable payments.

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

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

Three Months Ended Nine Months Ended

Rental revenue September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

The components of rental revenue for the three months ended March 31, 2023 and 2022 are as follows (amounts in thousands):

Three months ended

Rental revenue March 31, 2023 March 31, 2022

Fixed payments $ 124,564 $ 133,401

1 unchanged sentence

Total rental revenue $ 140,091 $ 147,514

As of September 30, 2022, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2039 (amounts in thousands):

As of March 31, 2023, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2040 (amounts in thousands):

Remainder of 2023 $ 368,524

3 unchanged sentences

The preceding table is prepared assuming such options are not exercised.

On March 12, 2023, Signature Bank, a tenant at 1400 Broadway and 1333 Broadway, was closed by the New York State Department of Financial Services and the Federal Deposit Insurance Corporation (“FDIC”) was named receiver.

As reported by the FDIC, to protect depositors, the FDIC transferred all the deposits and substantially all of the assets of Signature Bank to Signature Bridge Bank, N.A., (the “Bridge Bank”) a full-service bank that will be operated by the FDIC, in accordance with the terms of a transfer agreement (the “Transfer Agreement”).

On March 20, 2023, the FDIC entered into a purchase and assumption agreement (the “Flagstar Agreement”) for substantially all deposits and certain loan portfolios of Signature Bridge Bank, N.A., by Flagstar Bank, N.A., Hicksville, NY (“Flagstar”), a wholly owned subsidiary of New York Community Bancorp, Inc., Westbury, NY.

Our understanding is the terms of the Flagstar Agreement provides Flagstar with the right to accept or not to accept an assignment of Signature Bank’s lease by May 19, 2023.

Additionally, the terms of the Transfer Agreement provide the Bridge Bank 120 days, or until July 10, 2023, the right to assume or reject the lease.

As of the date of filing, there has been no official announcement from Flagstar or Bridge Bank with regards to Signature Bank’s lease.

While the tenant is current on all rent obligations to us through April 2023, uncertainty remains around whether the tenant will fulfill all of its obligations over the remaining term of their lease.

Our assessment of collectability of the remaining lease payments due to us is no longer probable and in accordance with ASC 842-30-25-13, we have recorded a $ 6.4 million reserve on Signature Bank’s straight-line rent receivable balance, that was calculated as the difference between the lease income that was recorded on a straight-line basis and the lease payments which have been collected from our tenant as of March 31, 2023.

We will continue to assess the collectability of lease payments due to us over the course of the lease.

We determine if an arrangement is a lease at inception.

Our operating lease agreements relate to three ground lease assets and are reflected in right-of-use assets of $ 28.7 million and lease liabilities of $ 28.7 million in our consolidated balance sheets as of September 30, 2022.

Our operating lease agreements relate to three ground lease assets and are reflected in right-of-use assets of $ 28.6 million and lease liabilities of $ 28.6 million in our condensed consolidated balance sheet as of March 31, 2023.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

4 unchanged sentences

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

The weighted average incremental borrowing rate used to calculate the right-of-use assets and lease liabilities as of September 30, 2022 was 4.5 %.

The weighted average incremental borrowing rate used to

calculate the right-of-use assets and lease liabilities as of March 31, 2023 was 4.5 %.

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

The weighted average remaining lease term as of September 30, 2022 was 47.7 years.

As of September 30, 2022, the following table summarizes our future minimum lease payments discounted by our incremental borrowing rates to calculate the lease liabilities of our leases (amounts in thousands):

The weighted average remaining lease term as of March 31, 2023 was 47.2 years.

As of March 31, 2023, the following table summarizes our future minimum lease payments discounted by our incremental borrowing rates to calculate the lease liabilities of our leases (amounts in thousands):

Remainder of 2023 $ 1,139

5 unchanged sentences

Legal Proceedings

Except as described below, as of September 30, 2022, we were not involved in any material litigation, nor, to our knowledge, was any material litigation threatened against us or our properties, other than routine litigation arising in the ordinary course of business such as disputes with tenants.

Except as described below, as of March 31, 2023, we were not involved in any material litigation, nor, to our knowledge, was any material litigation threatened against us or our properties, other than routine litigation arising in the ordinary course of business such as disputes with tenants.

We believe that the costs and related liabilities, if any, which may result from such actions will not materially affect our condensed consolidated financial position, operating results or liquidity.

11 unchanged sentences

This amount was recorded as an IPO litigation expense in the consolidated statement of operations for the year ended December 31, 2020.

Respondents believe that such award in favor of the Claimants is entirely without merit and sought to vacate that portion of the award.

On September 27, 2021, the court denied Respondents' motion to vacate and entered judgement in the aforementioned amount, inclusive of accumulated interest.

Respondents believe that such award in favor of the Claimants is entirely without merit and sought to vacate that

portion of the award.

On September 27, 2021, the court denied Respondents' motion to vacate and entered judgement in the

aforementioned amount, inclusive of accumulated interest.

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.

Claimants opposed the motion.

On April 20, 2023, the Court granted the motion.

On April 21, 2023, Respondents filed a petition to vacate in part and otherwise confirm in New York State court, where it is currently pending.

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

5 unchanged sentences

Malkin and Thomas N.

have defense and indemnity rights from us with respect to this arbitration.

Keltner, Jr., our retired general counsel, have defense and indemnity rights from us with respect to this arbitration.

Unfunded Capital Expenditures

At September 30, 2022, we estimate that we will incur approximately $ 117.9 million of capital expenditures (including tenant improvements and leasing commissions) on our properties pursuant to existing lease agreements.

At March 31, 2023, we estimate that we will incur approximately $ 107.9 million of capital expenditures (including tenant improvements and leasing commissions) on our properties pursuant to existing lease agreements.

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

3 unchanged sentences

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

At September 30, 2022, we held on deposit at various major financial institutions cash and cash equivalents and restricted cash balances in excess of amounts insured by the Federal Deposit Insurance Corporation.

At March 31, 2023, we held on deposit at various major financial institutions cash and cash equivalents and restricted cash balances in excess of amounts insured by the Federal Deposit Insurance Corporation.

Asset Retirement Obligations

3 unchanged sentences

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

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

As of March 31, 2023, management has no plans to remove or alter these properties in a manner that would trigger federal and other applicable regulations for asbestos removal, and accordingly, the obligations to remove the asbestos or asbestos-containing building materials from these properties have indeterminable settlement dates.

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

2 unchanged sentences

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

Required remediation to such properties has been completed, and as of September 30, 2022, management believes that there are no obligations related to environmental remediation other than maintaining the affected sites in conformity with the relevant authority’s mandates and filing the required documents.

Required remediation to such properties has been completed, other than our post-closing obligations for remediation at our Westport retail assets, as discussed in more detail in our Annual Report on Form 10-K for the year ended December 31, 2022, and as of March 31, 2023, with the exception of these two assets, management believes that there are no obligations related to environmental remediation other than maintaining the affected sites in conformity with the relevant authority’s mandates and filing the required documents.

All such maintenance costs are expensed as incurred.

3 unchanged sentences

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

As of September 30, 2022, there were 160,576,042 shares of Class A common stock 993,332 shares of Class B common stock and 110,959,627 operating partnership units outstanding, of which 161,569,374 , or 59.3 %, were owned by ESRT and 110,959,627 , or 40.7 %, were owned by other partners, including ESRT directors, members of senior management and other employees.

As of March 31, 2023, there were 160,339,762 shares of Class A common stock 988,974 shares of Class B common stock and 110,618,164 operating partnership units outstanding, of which 161,328,736 , or 59.3 %, were owned by ESRT and 110,618,164 , or 40.7 %, were owned by other partners, including ESRT directors, members of senior management and other employees.

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

2 unchanged sentences

The 2019 Plan provides for grants to directors, employees and consultants of ESRT and the Operating Partnership, including options, restricted stock, restricted stock units, stock appreciation rights, performance awards, dividend equivalents and other equity-based awards.

An aggregate of approximately 11.0 million shares of ESRT common stock is authorized for issuance under awards granted pursuant to the 2019 Plan.

An aggregate of approximately 11.0 million shares of ESRT common stock are authorized for issuance under awards granted pursuant to the 2019 Plan.

We will not issue any new equity awards under the First Amended and Restated Empire State Realty Trust, Inc.

1 unchanged sentence

2013 Equity Incentive Plan ("2013 Plan", and collectively with the 2019 Plan, "the Plans").

The shares of ESRT Class A common stock underlying any awards under the 2019 Plan and the 2013 Plan that are forfeited, canceled or otherwise terminated, other than by exercise, will be added back to the shares of ESRT Class A common stock available for issuance under the 2019 Plan.

The shares of ESRT Class A common stock underlying any awards under the 2019 Plan and the 2013 Plan that are forfeited, canceled or otherwise terminated, other than by

exercise, will be added back to the shares of ESRT Class A common stock available for issuance under the 2019 Plan.

Shares tendered or held back upon exercise of a stock option or settlement of an award under the 2019 Plan or the 2013 Plan to cover the exercise price or tax withholding and shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right upon exercise thereof, will not be added back to the shares of ESRT Class A common stock available for issuance under the 2019 Plan.

12 unchanged sentences

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

The following table summarizes ESRT's purchases of equity securities in each of the three months ended September 30, 2022:

The following table summarizes ESRT's purchases of equity securities in each of the three months ended March 31, 2023:

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

July 2022 184,045 $ 6.92 $ 434,286

August 2022 621,314 $ 7.32 $ 429,736

September 2022 1,761,561 $ 6.97 $ 417,455

January 2023 90,054 $ 6.70 $ 409,221

February 2023 — $ — $ 409,221

March 2023 843,333 $ 6.04 $ 404,130

Private Perpetual Preferred Units

As of September 30, 2022, there were 4,664,038 Series 2019 Preferred Units ("Series 2019 Preferred Units") and 1,560,360 Series 2014 Private Perpetual Preferred Units ("Series 2014 Preferred Units") outstanding.

As of March 31, 2023, there were 4,664,038 Series 2019 Preferred Units ("Series 2019 Preferred Units") and 1,560,360 Series 2014 Private Perpetual Preferred Units ("Series 2014 Preferred Units") outstanding.

The Series 2019 Preferred Units have a liquidation preference of $ 13.52 per unit and are entitled to receive cumulative preferential annual cash distributions of $ 0.70 per unit payable in arrears on a quarterly basis.

2 unchanged sentences

Distributions

Total distributions paid to OP unitholders were $ 9.6 million and $ 29.1 million for the three and nine months ended September 30, 2022, respectively, and $ 10.0 million and $ 19.4 million for the three and nine months ended September 30, 2021, respectively.

Total distributions paid to preferred unitholders were $ 1.1 million and $ 3.2 million for the three and nine months ended September 30, 2022, respectively, and $ 1.1 million and $ 3.2 million for the three and nine months ended September 30, 2021, respectively.

Total distributions paid to OP unitholders were $ 8.7 million and $ 9.8 million for the three months ended March 31, 2023 and 2022, respectively.

Total distributions paid to preferred unitholders were $ 1.1 million and $ 1.1 million for the three months ended March 31, 2023 and 2022, respectively.

Incentive and Share-Based Compensation

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

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

An aggregate of 11.0 million shares of ESRT common stock is authorized for issuance under awards granted pursuant to the 2019 Plan, and as of March 31, 2023, 4.4 million shares of ESRT common stock remain available for future issuance.

In March 2023, we made grants of LTIP units to executive officers under the 2019 Plan, including a total of 552,412 LTIP units that are subject to time-based vesting, 834,456 LTIP units that are subject to market-based vesting and 679,969 units that are subject to performance-based vesting with fair market values of $ 3.2 million, $ 3.9 million and $ 3.9 million, respectively.

In March 2023, we made grants of LTIP units and restricted stock to certain other employees under the 2019 Plan, including a total of 229,308 LTIP units and 370,465 shares of restricted stock that are subject to time-based vesting, 111,942 LTIP units that are subject to market-based vesting and 91,211 LTIP units that are subject to performance-based vesting, with fair market values of $ 1.5 million and $ 2.6 million, respectively, for the time-based vesting awards, $ 0.6 million for the market-based vesting awards and $ 0.6 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, 2024.

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, 2023.

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, 2023.

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 LTIP units then vest in two equal installments, on January 1, 2025 and December 31, 2026, subject generally to the grantee's continued employment on those dates.

In March 2023, we also made one-time additional grants of LTIP units to certain non-executive employees under the 2019 Plan.

At such time, we granted to certain other employees a total of 152,542 LTIP units that are subject to time-based vesting, with a fair market value of $ 1.0 million that vest over four and five year periods.

In 2023, 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, 2022, and 2023;

125 % for years prior to 2021).

In March 2023, we made grants of LTIP units to executive officers under the 2019 Plan in connection with the 2022 bonus election program.

We granted to executive officers a total of 521,571 LTIP units that are subject to time-based vesting with a fair market value of $ 3.0 million.

Of these LTIP units, 446,376 LTIP units vest ratably over three years from January 1, 2023, subject generally to the grantee's continued employment.

The first installment vests on January 1, 2024, and the remainder will vest thereafter in two equal annual installments on January 1, 2025 and January 1, 2026.

We also granted to our retired general counsel 75,195 LTIP units that vested immediately on the grant date.

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.

6 unchanged sentences

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.

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 an appropriate look-back period.

1 unchanged sentence

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 nine months ended September 30, 2022 were valued at $ 22.4 million.

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

LTIP units and ESRT restricted stock issued during the three months ended March 31, 2023 were valued at $ 20.2 million.

The weighted average per unit or share fair value was $ 5.69 for grants issued in 2023.

2 unchanged sentences

No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding in 2023.

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

The following is a summary of ESRT restricted stock and LTIP unit activity for the three months ended March 31, 2023:

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

3 unchanged sentences

Forfeited or unearned ( 1,221 ) — ( 1,645,223 ) ( 8,337 ) 4.27

Unvested balance at September 30, 2022 360,159 2,961,907 4,507,450 578,943 $ 6.67

Unvested balance at March 31, 2023 622,398 3,171,623 3,097,310 1,272,610 $ 6.56

The time-based LTIPs and ESRT restricted stock awards are treated for accounting purposes as immediately vested upon the later of (i) the date the grantee attains the age of 60 or 65 , as applicable, and (ii) the date on which grantee has first completed ten years of continuous service with our company or its affiliates.

For award agreements that qualify, we recognize noncash compensation expense on the grant date for the time-based awards and ratably over the vesting period for the market-based and performance-based awards, and accordingly, we recognized $ 0.4 million and $ 2.0 million for the three and nine months ended September 30, 2022, respectively, and $ 0.7 million and $ 2.1 million for the three and nine months ended September 30, 2021, respectively.

Unrecognized compensation expense was $ 1.2 million at September 30, 2022, which will be recognized over a weighted average period of 3.3 years.

For the remainder of the LTIP unit and ESRT restricted stock awards, we recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized noncash compensation expense of $ 4.8 million and $ 13.7

million for the three and nine months ended September 30, 2022, respectively, and $ 4.7 million and $ 13.3 million for the three and nine months ended September 30, 2021, respectively.

Unrecognized compensation expense was $ 30.7 million at September 30, 2022, which will be recognized over a weighted average period of 2.6 years.

For award agreements that qualify, we recognize noncash compensation expense on the grant date for the time-based awards and ratably over the vesting period for the market-based and performance-based awards, and accordingly, we recognized $ 0.7 million and $ 1.0 million for the three months ended March 31, 2023 and 2022, respectively.

Unrecognized compensation expense was $ 4.2 million at March 31, 2023, which will be recognized over a weighted average period of 2.9 years.

Unrecognized compensation expense was $ 36.2 million at March 31, 2023, which will be recognized over a weighted average period of 2.8 years.

Earnings Per Unit

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

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Earnings per unit for the three months ended March 31, 2023 and 2022 is computed as follows (amounts in thousands, except per share amounts):

Three Months Ended

March 31, 2023 March 31, 2022

Net income (loss) $ 11,694 $ ( 17,221 )

6 unchanged sentences

Stock-based compensation plans

1,086 — 1,086 —

Weighted average units outstanding –- diluted 265,197 273,759

2 unchanged sentences

Diluted $ 0.04 $ ( 0.07 )

There were zero and zero antidilutive shares and LTIP units for the three and nine months ended September 30, 2022, respectively, and 1,084 and 998 antidilutive shares and LTIP units for the three and nine months ended September 30, 2021, respectively.

There were zero and 194 antidilutive shares and LTIP units for the three months ended March 31, 2023 and 2022, respectively.

Related Party Transactions

1 unchanged sentence

We earned supervisory fees from entities affiliated with Anthony E.

Malkin, our Chairman, President and Chief Executive Officer, of $ 0.2 million and $ 0.3 million for the three months ended September 30, 2022 and 2021, respectively, and $ 0.8 million and $ 0.8 million for the nine months ended September 30, 2022 and 2021, respectively.

Malkin, our Chairman, President and Chief Executive Officer, of $ 0.2 million and $ 0.2 million for the three months ended March 31, 2023 and 2022, respectively.

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

1 unchanged sentence

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

Malkin of $ 0.1 million and $ 0.1 million for the three months ended September 30, 2022 and 2021, respectively, and $ 0.2 million and $ 0.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Malkin of $ 0.1 million and $ 0.1 million for the three months ended March 31, 2023 and 2022, respectively.

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

5 unchanged sentences

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

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

Total aggregate revenue was $ 0.1 million and $ 0.1 million for the three months ended March 31, 2023 and 2022, respectively.

As disclosed in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2022, in connection with the sale of our Westport retail assets in February 2023, we advanced a loan to the buyer to facilitate closing with a principal amount of $ 0.6 million, which bears interest at SOFR plus 3.5 % and requires repayment of principal to the extent of available cash flow of the property.

As of March 31, 2023, the amount outstanding under the loan is $ 0.6 million and is recorded as part of amounts due to affiliated companies, net which is included in accounts payable and accrued expenses on the condensed consolidated balance sheet.

Segment Reporting

5 unchanged sentences

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

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

Three Months Ended September 30, 2022

Real Estate Observatory Intersegment Elimination Total

Rental revenue $ 148,290 $ — $ — $ 148,290

Intercompany rental revenue 19,072 — ( 19,072 ) —

Observatory revenue — 33,051 — 33,051

Lease termination fees — — — —

Third-party management and other fees 389 — — 389

Other revenue and fees 1,982 — — 1,982

Total revenues 169,733 33,051 ( 19,072 ) 183,712

Operating expenses:

Property operating expenses 42,798 — — 42,798

Intercompany rent expense — 19,072 ( 19,072 ) —

Ground rent expense 2,331 — — 2,331

General and administrative expenses 15,725 — — 15,725

Observatory expenses — 8,516 — 8,516

Real estate taxes 31,831 — — 31,831

Depreciation and amortization 46,933 51 — 46,984

Total operating expenses 139,618 27,639 ( 19,072 ) 148,185

Total operating income 30,115 5,412 — 35,527

Other income (expense):

Interest income 1,530 34 — 1,564

Interest expense ( 25,516 ) — — ( 25,516 )

Gain on disposition of property — — — —

Income before income taxes 6,129 5,446 — 11,575

Income tax expense ( 359 ) ( 1,098 ) — ( 1,457 )

Net income $ 5,770 $ 4,348 $ — $ 10,118

Segment assets $ 3,950,883 $ 250,257 $ — $ 4,201,140

Expenditures for segment assets $ 18,686 $ 24 $ — $ 18,710

Three Months Ended September 30, 2021

The following tables provide components of segment net income (loss) for each segment for the three and three months ended March 31, 2023 and 2022 (amounts in thousands):

Three Months Ended March 31, 2023

Real Estate Observatory Intersegment Elimination Total

2 unchanged sentences

Observatory revenue — 22,154 — 22,154

Lease termination fees 11,321 — — 11,321

Third-party management and other fees 427 — — 427

4 unchanged sentences

Intercompany rent expense — 15,914 ( 15,914 ) —

Ground rent expense 2,331 — — 2,331

Ground rent expenses 2,331 — — 2,331

General and administrative expenses 15,708 — — 15,708

7 unchanged sentences

Interest expense ( 25,304 ) — — ( 25,304 )

Gain on sale of property 15,696 — — 15,696

Income (loss) before income taxes 12,097 ( 1,622 ) — 10,475

3 unchanged sentences

Expenditures for segment assets $ 34,536 $ 58 $ — $ 34,594

Nine Months Ended September 30, 2022

Real Estate Observatory Intersegment Elimination Total

Rental revenue $ 445,143 $ — $ — $ 445,143

Intercompany rental revenue 46,801 — ( 46,801 ) —

Observatory revenue — 73,660 — 73,660

Lease termination fees 20,032 — — 20,032

Third-party management and other fees 1,025 — — 1,025

Other revenue and fees 5,908 — — 5,908

Total revenues 518,909 73,660 ( 46,801 ) 545,768

Operating expenses:

Property operating expenses 118,875 — — 118,875

Intercompany rent expense — 46,801 ( 46,801 ) —

Ground rent expense 6,994 — — 6,994

General and administrative expenses 45,287 — — 45,287

Observatory expenses — 22,507 — 22,507

Real estate taxes 91,637 — — 91,637

Depreciation and amortization 172,258 136 — 172,394

Total operating expenses 435,051 69,444 ( 46,801 ) 457,694

Total operating income (loss)

83,858 4,216 — 88,074

Other income (expense):

Interest income 2,105 39 — 2,144

Interest expense ( 75,572 ) — — ( 75,572 )

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

Income (loss) before income taxes 37,561 4,255 — 41,816

Income tax (expense) benefit ( 541 ) 317 — ( 224 )

Net income $ 37,020 $ 4,572 $ — $ 41,592

Expenditures for segment assets $ 70,795 $ 315 $ — $ 71,110

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Real Estate Observatory Intersegment Elimination Total

19 unchanged sentences

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

Loss on early extinguishment of debt

( 214 ) — — ( 214 )

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

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

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

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

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

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

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements