What changed in this filing

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Item 1. Financial Statements

2023-11-08 compared with 2023-08-04 · 180 added, 190 removed, 644 unchanged (36% of the section changed)

3 unchanged sentences

(amounts in thousands, except per unit amounts)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

ASSETS (unaudited)

31 unchanged sentences

Private perpetual preferred units:

Private perpetual preferred units, $ 13.52 liquidation preference, 4,664 issued and outstanding in 2023 and 2022, respectively

Private perpetual preferred units, $ 13.52 liquidation preference, 4,664 issued and outstanding in 2023 and 2022

21,936 21,936

16 unchanged sentences

(amounts in thousands, except per unit amounts)

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

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

2023 2022 2023 2022

36 unchanged sentences

(amounts in thousands)

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

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

2023 2022 2023 2022

6 unchanged sentences

Net (income) loss attributable to non-controlling interest in other partnerships ( 111 ) 49 ( 69 ) 271

Other comprehensive (income) loss attributable to non-controlling interest in other partnerships ( 285 ) ( 1,627 ) 96 ( 1,627 )

Other comprehensive income attributable to non-controlling interest in other partnerships ( 480 ) ( 670 ) ( 384 ) ( 2,297 )

Comprehensive income attributable to OP unitholders $ 26,587 $ 30,477 $ 78,753 $ 86,401

2 unchanged sentences

Condensed Consolidated Statements of Capital

For The Three Months Ended June 30, 2023 and 2022

For The Three Months Ended September 30, 2023 and 2022

(amounts in thousands)

2 unchanged sentences

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

Balance at March 31, 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

Balance at June 30, 2023 6,224 $ 29,940 160,830 $ 965,950 81,611 $ 695,416 20,426 $ 3,810 5,380 $ 681 2,669 $ 375 15,440 $ 1,711,612

Conversion of operating partnership units to ESRT Partner's Capital

— — 1,506 10,663 ( 1,244 ) ( 10,616 ) ( 183 ) ( 36 ) ( 55 ) ( 8 ) ( 24 ) ( 3 ) — —

Repurchases of common shares — — ( 1,218 ) ( 7,411 ) — — — — — — — — — ( 7,411 )

Contributions from consolidated joint ventures — — — — — — — — — — — — 75 75

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

Equity compensation — — ( 2 ) 449 36 4,540 — — — — — — — 4,989

2 unchanged sentences

Other comprehensive income — — — 4,144 — 1,893 — 524 — 142 — 67 480 7,250

Balance at June 30, 2023 6,224 $ 29,940 160,830 $ 965,950 81,611 $ 695,416 20,426 $ 3,810 5,380 $ 681 2,669 $ 375 15,440 $ 1,711,612

Balance at September 30, 2023 6,224 $ 29,940 162,334 $ 987,083 80,403 $ 693,627 20,243 $ 5,007 5,325 $ 1,022 2,645 $ 535 $ 16,106 $ 1,733,320

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

1 unchanged sentence

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

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

Conversion of operating partnership units to ESRT Partner's Capital

3 unchanged sentences

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

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

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

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

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

Empire State Realty OP, L.P.

Condensed Consolidated Statements of Capital

For The Six Months Ended June 30, 2023 and 2022

For The Nine Months Ended September 30, 2023 and 2022

(amounts in thousands)

9 unchanged sentences

Distributions — ( 3,151 ) — ( 16,980 ) — ( 7,660 ) — ( 2,150 ) — ( 569 ) — ( 281 ) — ( 30,791 )

Net income (loss) — 2,101 — 28,373 — 13,092 — 3,681 — 978 — 466 ( 42 ) 48,649

Net income — 3,151 — 39,933 — 18,300 — 5,098 — 1,372 — 654 69 68,577

Other comprehensive income — — — 6,260 — 2,869 — 799 — 215 — 102 384 10,629

Balance at June 30, 2023 6,224 $ 29,940 160,830 $ 965,950 81,611 $ 695,416 20,426 $ 3,810 5,380 $ 681 2,669 $ 375 $ 15,440 $ 1,711,612

Balance at September 30, 2023 6,224 $ 29,940 162,334 $ 987,083 80,403 $ 693,627 20,243 $ 5,007 5,325 $ 1,022 2,645 $ 535 $ 16,106 $ 1,733,320

10 unchanged sentences

Other comprehensive income — — — 27,435 — 12,070 — 3,608 — 935 — 490 2,297 46,835

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

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

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

2 unchanged sentences

(amounts in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows From Operating Activities

17 unchanged sentences

Cash Flows From Investing Activities

Acquisition of real estate property ( 26,910 ) —

Net proceeds from disposition of property 88,910 —

1 unchanged sentence

Additions to building and improvements ( 101,379 ) ( 89,085 )

Net cash provided by (used in) investing activities 12,744 ( 56,645 )

Net cash used in investing activities ( 39,379 ) ( 89,116 )

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

2 unchanged sentences

(amounts in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows From Financing Activities

21 unchanged sentences

Derivative instruments at fair values included in prepaid expenses and other assets 25,578 18,457

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

Conversion of operating partnership units to ESRT partner's capital 15,682 2,384

9 unchanged sentences

(the "Operating Partnership") is the entity through which Empire State Realty Trust, Inc.

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

We own, manage, operate, acquire and reposition office, retail and multifamily properties 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 June 30, 2023, our office and retail portfolio contained 9.4 million rentable square feet of office and retail space.

We owned 11 office properties (including three long-term ground leasehold interests) encompassing approximately 8.6 million rentable square feet of office space.

Nine of these 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 an aggregate of approximately 0.5 million rentable square feet of retail space on their ground floor and/or contiguous levels.

Our remaining two office properties are located in Fairfield County, Connecticut, encompassing approximately 1.1 million rentable square feet.

These two properties are 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 June 30, 2023, our portfolio included four standalone retail properties located in Manhattan encompassing approximately 0.2 million rentable square feet.

Additionally, as of June 30, 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 (the "IPO").

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

We have four revenue drivers:

a portfolio of modernized, amenitized and well-located office, retail, and multifamily assets.

ESRT’s flagship Empire State Building – the “World’s Most Famous Building” – also includes its Observatory Experience, Tripadvisor’s #1 United States destination attraction in its 2023 Travelers’ Choice Best of the Best Awards for two consecutive years.

As of September 30, 2023, ESRT’s portfolio is comprised of approximately 8.6 million rentable square feet of office space, 0.7 million rentable square feet of retail space and 727 residential units.

Our office portfolio included 11 properties (including three long-term ground leasehold interests) encompassing approximately 8.6 million rentable square feet.

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

The remaining two office properties encompass approximately 1.1 million rentable square feet and are located in Stamford, Connecticut, with immediate access to mass transportation.

Additionally, we have entitled land adjacent to one of the Stamford office properties, that can support the development of an approximately 0.4 million rentable square foot office building and garage.

Our retail portfolio included approximately 0.7 million rentable square feet of retail space, predominantly located in Manhattan.

Our multifamily portfolio included 727 residential units in New York City, 721 of which are located in Manhattan.

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

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 June 30, 2023, ESRT owned approximately 59.4 % of our operating partnership units.

As of September 30, 2023, ESRT owned approximately 59.9 % of our operating partnership units.

Summary of Significant Accounting Policies

1 unchanged sentence

Basis of Quarterly Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), for interim financial information, and with the rules and regulations of the Securities and Exchange Commission (the "SEC").

Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations.

3 unchanged sentences

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.

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 leasing activity.

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

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.

6 unchanged sentences

The intermediary entity was utilized to execute a like-kind exchange and subsequent to March 31, 2023, the like-kind exchange was completed and we took title to 298 Mulberry.

Therefore,we had no VIEs at June 30, 2023.

Therefore, we had no VIEs at September 30, 2023.

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

10 unchanged sentences

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 were classified as held for sale in our condensed consolidated balance sheets as of December 31, 2022 having met the held-for-sale criteria set forth in ASC 360 Property, Plant, and Equipment.

We closed on the sale of this property on April 5, 2023 and no longer classify its assets and related liabilities as held for sale as of June 30, 2023.

In connection with the sale, we recorded a gain of $ 13.6 million which is included in Gain on disposition of property in our condensed consolidated statements of operations.

In accordance with ASC 450, included in this gain is approximately $ 2.0 million of estimated post-closing obligations related to contaminated soil remediation costs and our commitment to reimburse the buyer for a delay in rent commencement from a tenant impacted by the soil remediation efforts.

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 disposition of property in our

condensed consolidated statements 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 for more information.

Property Acquisitions

On September 14, 2023, we closed on the acquisition of a retail property in Williamsburg, Brooklyn, located on the corner of North 6 th Street and Wythe Avenue for a purchase price of $ 26.4 million.

The property has three retail tenants and six residential units, and was fully leased as of September 30, 2023.

The transaction was executed in accordance with a "1031 Exchange" under Section 1031 of the Internal Revenue Code of 1986, as amended.

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

The following table summarizes properties acquired during the nine and twelve months ended September 30, 2023 and December 31, 2022, respectively (amounts in thousands):

Property Date Acquired Land Building and Improvements Assets Liabilities Total*

Williamsburg Retail, Brooklyn 9/14/2023 $ 4,851 $ 20,936 $ 1,573 $ ( 300 ) $ 27,060

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

*Includes total capitalized transaction costs of $ 1.4 million.

Property Dispositions

The following table summarizes properties disposed of during the nine and twelve months ended September 30, 2023 and December 31, 2022, respectively (amounts in thousands):

Property Date of Disposal Sales Price Gain on Disposition

500 Mamaroneck Avenue, Harrison, New York* 4/5/2023 $ 53,000 $ 13,572

69-97 and 103-107 Main Street, Westport, Connecticut 2/1/2023 $ 40,000 $ 15,689

10 Bank Street, White Plains, New York 12/7/2022 $ 42,000 $ 6,818

383 Main Avenue, Norwalk, Connecticut** 4/1/2022 $ 30,000 $ 27,170

*The gain is net of approximately $ 2.0 million of estimated post-closing obligations related to contaminated soil remediation costs and our commitment to reimburse the buyer for a delay in rent commencement from a tenant impacted by the soil remediation efforts.

Should this rent commencement be delayed beyond our current estimate, our maximum exposure to reimburse the buyer for such a delay, as limited by amounts held in escrow, is an incremental post-closing obligation of $ 3.6 million.

**We transferred the property, which was encumbered by a $ 30.0 million mortgage, back to the lender in a consensual foreclosure and recognized a non-cash gain upon the disposition.

Deferred Costs, Acquired Lease Intangibles and Goodwill

Deferred costs, net, consisted of the following as of June 30, 2023 and December 31, 2022 (amounts in thousands):

June 30, 2023 December 31, 2022

Deferred costs, net, consisted of the following as of September 30, 2023 and December 31, 2022 (amounts in thousands):

September 30, 2023 December 31, 2022

Leasing costs $ 222,272 $ 218,707

4 unchanged sentences

Total deferred costs, net, excluding net deferred financing costs $ 172,088 $ 183,977

At June 30, 2023 and December 31, 2022, $ 3.9 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 $ 6.1 million and $ 11.9 million for the three and six months ended June 30, 2023, respectively, and $ 7.3 million and $ 14.3 million for the three and six months ended June 30, 2022, respectively.

Amortization expense related to acquired lease intangibles was $ 2.3 million and $ 4.6 million for the three and six months ended June 30, 2023, respectively, and $ 4.1 million and $ 8.3 million for the three and six months ended June 30, 2022, respectively.

Amortizing acquired intangible assets and liabilities consisted of the following as of June 30, 2023 and December 31, 2022 (amounts in thousands):

June 30, 2023 December 31, 2022

At September 30, 2023 and December 31, 2022, $ 3.4 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 $ 17.7 million for the three and nine months ended September 30, 2023, respectively, and $ 5.6 million and $ 19.8 million for the three and nine months ended September 30, 2022, respectively.

Amortization expense related to acquired lease intangibles was $ 1.5 million and $ 6.1 million for the three and nine months ended September 30, 2023, respectively, and $ 2.2 million and $ 10.6 million for the three and nine months ended September 30, 2022, respectively.

Amortizing acquired intangible assets and liabilities consisted of the following as of September 30, 2023 and December 31, 2022 (amounts in thousands):

September 30, 2023 December 31, 2022

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

1 unchanged sentence

Acquired below-market ground leases, net $ 323,199 $ 329,073

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Acquired below-market leases $ ( 55,186 ) $ ( 64,656 )

1 unchanged sentence

Acquired below-market leases, net $ ( 14,703 ) $ ( 17,849 )

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $ 0.7 million and $ 1.4 million for the three and six months ended June 30, 2023, respectively, and $ 1.7 million and $ 3.5 million for the three and six months ended June 30, 2022, respectively.

As of June 30, 2023 and December 31, 2022, we had goodwill of $ 491.5 million.

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $ 0.6 million and $ 1.9 million for the three and nine months ended September 30, 2023, respectively, and $ 0.7 million and $ 4.1 million for the three and nine months ended September 30, 2022, respectively.

As of September 30, 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.

3 unchanged sentences

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.

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.

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

For the quarter ended June 30, 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.

Subsequent to our last annual goodwill impairment test, we have performed quarterly qualitative assessments and have not identified any events 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 June 30, 2023 and December 31, 2022 (amounts in thousands):

Principal Balance As of June 30, 2023

June 30, 2023 December 31, 2022 Stated

Debt consisted of the following as of September 30, 2023 and December 31, 2022 (amounts in thousands):

Principal Balance As of September 30, 2023

September 30, 2023 December 31, 2022 Stated

Rate Effective

Mortgage debt collateralized by:

Fixed rate mortgage debt

Mortgage debt

Metro Center $ 80,710 $ 82,596 3.59 % 3.67 % 11/5/2024

6 unchanged sentences

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

345 East 94th Street - Series A (5)

43,600 43,600 70.0 % of SOFR plus 0.95 %

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

3.56 % 11/1/2030

345 East 94th Street - Series B (5)

7,544 7,865 SOFR plus 2.24 %

345 East 94th Street - Series B 7,378 7,865 SOFR plus 2.24 %

3.56 % 11/1/2030

561 10th Avenue - Series A (5)

114,500 114,500 70.0 % of SOFR plus 1.07 %

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

3.85 % 11/1/2033

561 10th Avenue - Series B (5)

16,627 17,415 SOFR plus 2.45 %

561 10th Avenue - Series B 16,219 17,415 SOFR plus 2.45 %

3.85 % 11/1/2033

22 unchanged sentences

______________

(1) The effective rate is the yield as of June 30, 2023 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 September 30, 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 $ 12.4 million loan bearing interest at 6.25 %.

(4) At June 30, 2023, we were in compliance with all debt covenants.

(5) As of May 18, 2023, the benchmark index rate was converted from LIBOR to SOFR, plus a benchmark adjustment of 11.4 basis points.

(4) At September 30, 2023, we were in compliance with all debt covenants.

Principal Payments

Aggregate required principal payments at June 30, 2023 are as follows (amounts in thousands):

Aggregate required principal payments at September 30, 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 June 30, 2023 and December 31, 2022 (amounts in thousands):

June 30, 2023 December 31, 2022

Deferred financing costs, net, consisted of the following at September 30, 2023 and December 31, 2022 (amounts in thousands):

September 30, 2023 December 31, 2022

Financing costs $ 43,473 $ 43,473

1 unchanged sentence

Total deferred financing costs, net $ 13,453 $ 16,720

Amortization expense related to deferred financing costs was $ 1.1 million and $ 2.2 million for the three and six months ended June 30, 2023, respectively, and $ 1.3 million and $ 2.7 million for the three and six months ended June 30, 2022, respectively.

Amortization expense related to deferred financing costs was $ 1.1 million and $ 3.3 million for the three and nine months ended September 30, 2023, respectively, and $ 1.2 million and $ 3.8 million for the three and nine months ended September 30, 2022, respectively.

Unsecured Revolving Credit and Term Loan Facilities

2 unchanged sentences

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 June 30, 2023 , we had no borrowings under the revolving credit facility and $ 215.0 million under the term loan facility.

As of September 30, 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”).

2 unchanged sentences

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 June 30, 2023 , our borrowings amounted to $ 175.0 million under the Wells Term Loan Facility.

As of September 30, 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 June 30, 2023, we were in compliance with these covenants.

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, 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 June 30, 2023, we were in compliance with these covenants.

As of September 30, 2023, we were in compliance with these covenants.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following as of June 30, 2023 and December 31, 2022 (amounts in thousands):

June 30, 2023 December 31, 2022

Accounts payable and accrued expenses consisted of the following as of September 30, 2023 and December 31, 2022 (amounts in thousands):

September 30, 2023 December 31, 2022

Accrued capital expenditures $ 44,099 $ 44,293

10 unchanged sentences

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 June 30, 2023, we did not have derivatives in a net liability position.

As of June 30, 2023 and December 31, 2022, we had interest rate swaps and caps with an aggregate notional value of $ 574.0 million and $ 574.8 million, respectively.

As of September 30, 2023, we did not have derivatives in a net liability position.

As of September 30, 2023 and December 31, 2022, we had interest rate swaps and caps with an aggregate notional value of $ 573.6 million and $ 574.8 million, respectively.

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

As of June 30, 2023 and December 31, 2022, the fair value of our derivative instruments in an asset position amounted to $ 19.4 million and $ 17.9 million, respectively, which is included in prepaid expenses and other assets on the condensed consolidated balance sheets.

As of September 30, 2023 and December 31, 2022, the fair value of our derivative instruments in an asset position amounted to $ 25.6 million and $ 17.9 million, respectively, which is included in prepaid expenses and other assets on the condensed 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 June 30, 2023 and 2022, our cash flow hedges are deemed highly effective and a net unrealized gain of $ 10.1 million and $ 3.4 million for the three and six months ended June 30, 2023, respectively and a net unrealized gain of $ 12.8 million and $ 25.9 million for the three and six months ended June 30, 2022, respectively, relating to both active and terminated hedges of interest rate risk, are reflected in the condensed consolidated statements of comprehensive income (loss).

As of September 30, 2023 and 2022, our cash flow hedges are deemed highly effective and a net unrealized gain of $ 7.3 million and $ 10.6 million for the three and nine months ended September 30, 2023, respectively, and a net unrealized gain of $ 21.0 million and $ 46.8 million for the three and nine months ended September 30, 2022, respectively, relating to both active and terminated hedges of interest rate risk, are reflected in the condensed consolidated statements of comprehensive income.

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 $ 8.8 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 June 30, 2023 and December 31, 2022 (amounts in thousands):

June 30, 2023 December 31, 2022

The table below summarizes the terms of agreements and the fair values of our derivative financial instruments as of September 30, 2023 and December 31, 2022 (amounts in thousands):

September 30, 2023 December 31, 2022

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

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$ 25,600 $ — $ 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 six months ended June 30, 2023 and 2022 (amounts in thousands):

Three Months Ended Six Months Ended

Effects of Cash Flow Hedges June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Amount of gain (loss) recognized in other comprehensive income (loss) $ 11,935 $ 10,057 $ 6,533 $ 19,819

Amount of loss reclassified from accumulated other comprehensive income (loss) into interest expense 1,882 ( 2,741 ) 3,154 ( 6,036 )

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on the condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 (amounts in thousands):

Three Months Ended Six Months Ended

Effects of Cash Flow Hedges June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

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, 2023 and 2022 (amounts in thousands):

Three Months Ended Nine Months Ended

Effects of Cash Flow Hedges September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Amount of gain recognized in other comprehensive income (loss) $ 9,525 $ 19,588 $ 16,058 $ 39,407

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense 2,275 ( 1,392 ) 5,429 ( 7,428 )

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, 2023 and 2022 (amounts in thousands):

Three Months Ended Nine Months Ended

Effects of Cash Flow Hedges September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Total interest expense presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded $ ( 25,382 ) $ ( 25,516 ) $ ( 76,091 ) $ ( 75,572 )

Amount of loss reclassified from accumulated other comprehensive income (loss) into interest expense 1,882 ( 2,741 ) 3,154 ( 6,036 )

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense 2,275 ( 1,392 ) 5,429 ( 7,428 )

Fair Valuation

The estimated fair values at June 30, 2023 and December 31, 2022 were determined by management, using available market information and appropriate valuation methodologies.

The estimated fair values at September 30, 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.

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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 June 30, 2023 and December 31, 2022 (amounts in thousands):

June 30, 2023

The following tables summarize the carrying and estimated fair values of our financial instruments as of September 30, 2023 and December 31, 2022 (amounts in thousands):

September 30, 2023

Estimated Fair Value

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Interest rate swaps included in prepaid expenses and other assets $ 25,578 $ 25,578 $ — $ 25,578 $ —

Interest rate swaps included in accounts payable and accrued expenses — — — — —

Mortgage notes payable 878,757 752,874 — — 752,874

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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 June 30, 2023 and December 31, 2022.

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

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

Operating expense reimbursements are reflected in our June 30, 2023 and 2022 condensed consolidated statements of operations as rental revenue.

Operating expense reimbursements are reflected in our September 30, 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 six months ended June 30, 2023 and 2022 are as follows (amounts in thousands):

Three Months Ended Six Months Ended

Rental revenue June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

The components of rental revenue for the three and nine months ended September 30, 2023 and 2022 are as follows (amounts in thousands):

Three Months Ended Nine Months Ended

Rental revenue September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Fixed payments $ 132,862 $ 131,800 $ 395,744 $ 399,995

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Total rental revenue $ 151,458 $ 148,290 $ 446,152 $ 445,143

As of June 30, 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):

As of September 30, 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 $ 124,805

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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, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver.

On March 20, 2023, Flagstar Bank, N.A.

(“Flagstar”), a wholly owned subsidiary of New York Community Bancorp, Inc., assumed substantially all of the deposits and certain loan portfolios of Signature Bank.

As of March 31, 2023, Flagstar had not yet assumed or rejected our leases, and our assessment of collectability of the remaining lease payments due to us in accordance with ASC 842-30-25-13 caused us to record a $ 6.4 million reserve on Signature Bank’s straight-line rent receivable balance.

On May 18, 2023, Flagstar assumed the entire 313,109 square foot lease at 1400 Broadway under the same terms through 2039, with the exception of an approximate $ 3 per square foot reduction for the first five years of the lease amendment.

As such, we reversed $ 5.8 million of the $ 6.4 million reserve taken in the first quarter of 2023 and resumed accounting for this tenant on a straight-line basis.

On May 1, 2023, First Republic Bank, a tenant of 14,430 square feet of retail space in the base of One Grand Central Place was closed by the California Department of Financial Protection and Innovation and the FDIC was appointed as the receiver.

JPMorgan Chase Bank, National Association agreed to assume all of the deposits and to purchase substantially all of the assets of First Republic Bank.

The FDIC has until September 28, 2023 to assume or reject our lease at One Grand Central Place.

Although this tenant is current on its rental obligations to us, as of June 30, 2023, we maintain a $ 0.2 million reserve on First Republic Bank’s straight-line rent receivable balance.

Refer to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 in the section "Financial Statements - Note 8.

Leases" for prior disclosures related to the Signature Bank and First Republic Bank leases.

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 $ 28.6 million and lease liabilities of $ 28.6 million in our condensed consolidated balance sheets as of June 30, 2023.

Our operating lease agreements relate to three ground lease assets and are reflected in right-of-use assets of $ 28.5 million and lease liabilities of $ 28.5 million in our condensed consolidated balance sheets as of September 30, 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.

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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 June 30, 2023 was 4.5 %.

The weighted average incremental borrowing rate used to calculate the right-of-use assets and lease liabilities as of September 30, 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 June 30, 2023 was 46.9 years.

As of June 30, 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):

The weighted average remaining lease term as of September 30, 2023 was 46.7 years.

As of September 30, 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 $ 380

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Legal Proceedings

Except as described below, as of June 30, 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.

Except as described below, as of September 30, 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.

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On August 26, 2020, the arbitration panel issued an award that denied all Claimants’ claims with one exception, on which it awarded the Claimants approximately $ 1.2 million, inclusive of seven years of interest through October 2, 2020.

This amount was recorded as an IPO litigation expense in the consolidated statements of operations for the year ended December 31, 2020.The Respondents believe that such award in favor of the Claimants is entirely without merit and, in an action filed in the United States District Court for the Southern District of New York, sought to vacate that portion of the award.

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

The Respondents believe that such award in favor of the Claimants is entirely without merit and, in an action filed in the United States District Court for the Southern District of New York, sought to vacate that portion of the award.

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

The Respondents have appealed that ruling.

The Respondents appealed that ruling.

On May 10, 2022, the 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.

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On April 21, 2023, the Respondents filed a petition to vacate in part and otherwise confirm in New York State court.

On April 28, 2023, the Claimants filed a motion to confirm in that same court..

On April 28, 2023, all but one of the Claimants filed a motion to confirm in that same court.

On July 31, 2023, the New York State court denied the Respondents’ petition to vacate in part and confirmed the award.

The Respondents believe that ruling is incorrect and are considering their options with respect thereto.

The Respondents believe that ruling is incorrect and have filed an appeal, which is pending.

On August 4, 2023, one final Claimant who had not filed a petition to confirm in New York State court did so.

On September 14, 2023, the Respondents filed an opposition to that petition, which is pending.

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

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Unfunded Capital Expenditures

At June 30, 2023, we estimate that we will incur approximately $ 138.4 million of capital expenditures (including tenant improvements and leasing commissions) on our properties pursuant to existing lease agreements.

At September 30, 2023, we estimate that we will incur approximately $ 139.3 million of capital expenditures (including tenant improvements and leasing commissions) on our properties pursuant to existing lease agreements.

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

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

At June 30, 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 FDIC.

At September 30, 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 FDIC.

Asset Retirement Obligations

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

As of June 30, 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 of September 30, 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.

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Required remediation to such properties has been completed, other than our post-closing obligations for remediation at our previously owned Westport retail assets, as discussed in more detail in our Annual Report, and at our previously owned 500 Mamaroneck property as discussed in “Financial Statements - Note 3.

Acquisitions and Dispositions.” As of June 30, 2023, with the exception of these three 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.

Acquisitions and Dispositions.” As of September 30, 2023, with the exception of these three 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.

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

As of June 30, 2023, there were 159,842,614 shares of Class A common stock, 988,180 shares of Class B common stock and 110,086,858 operating partnership units outstanding.

The controlling interest of 59.4 % is owned by ESRT and the remaining 40.6 % noncontrolling interest in the OP is owned by other limited partners, including ESRT directors, members of senior management and other employees.

As of September 30, 2023, there were 161,346,829 shares of Class A common stock, 986,884 shares of Class B common stock and 108,617,764 operating partnership units outstanding.

The controlling interest of 59.9 % is owned by ESRT.

The other 40.1 % noncontrolling interest in the OP is diversified among various limited partners, some of whom include Company directors, senior management and employees.

ESRT has two classes of common stock as a means to give its OP Unit holders voting rights in the public company that correspond to their economic interest in the combined entity.

A one-time option was created at our formation transactions for any pre-IPO OP Unit holder to exchange one OP Unit out of every 50 OP Units they owned for one Class B share, and such Class B share carries 50 votes.

A one-time option was created at our formation transactions for any pre-IPO OP Unit holder to exchange one OP Unit out of every 50 OP Units they owned for one ESRT Class B share, and such ESRT Class B share carries 50 votes per share.

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

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

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 are authorized for issuance under awards granted pursuant to the 2019 Plan.

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

The following table summarizes ESRT's purchases of equity securities in each of the three months ended June 30, 2023:

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

April 1 - April 30, 2023 1,214,770 $ 6.09 $ 396,736

May 1 - May 31, 2023 2,700 $ 6.00 $ 396,720

June 1 - June 30, 2023 — $ — $ 396,720

There were no purchases of equity securities in the three months ended September 30, 2023.

Private Perpetual Preferred Units

As of June 30, 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.

As of September 30, 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.

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Distributions

Total distributions paid to OP unitholders were $ 9.5 million and $ 18.2 million for the three and six months ended June 30, 2023, respectively, and $ 9.7 million and $ 19.5 million for the three and six months ended June 30, 2022, respectively.

Total distributions paid to preferred unitholders were $ 1.1 million and $ 2.1 million for the three and six months ended June 30, 2023, respectively, and $ 1.1 million and $ 2.1 million for the three and six months ended June 30, 2022, respectively.

Total distributions paid to OP unitholders were $ 9.5 million and $ 27.6 million for the three and nine months ended September 30, 2023, respectively, and $ 9.6 million and $ 29.1 million for the three and nine months ended September 30, 2022, respectively.

Total distributions paid to preferred unitholders were $ 1.1 million and $ 3.2 million for the three and nine months ended September 30, 2023, respectively, and $ 1.1 million and $ 3.2 million for the three and nine months ended September 30, 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 June 30, 2023, 4.2 million shares of ESRT common stock remain available for future issuance.

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

In May 2023, 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, in May 2023, we granted a total of 237,856 LTIP units that are subject to time-based vesting with fair market values of $ 1.2 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.

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, 2023, 4.2 million shares of ESRT common stock remain available for future issuance.

During July 2023, we granted our two new directors, Christina Van Tassell and Hannah Yang, a total of 27,000 LTIP units which are subject to time-based vesting with a combined fair market value of $ 0.2 million.

One-fourth of the units will vest on May 12, 2024, and the remainder shall vest in substantially equal installments on each subsequent anniversary for a period of three years thereafter.

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.

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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 six months ended June 30, 2023 were valued at $ 21.4 million.

The weighted average per unit or share fair value was $ 5.65 for grants issued for the six months ended June 30, 2023.

LTIP units and ESRT restricted stock issued during the nine months ended September 30, 2023 were valued at $ 21.7 million.

The weighted average per unit or share fair value was $ 5.67 for grants issued for the nine months ended September 30, 2023.

The fair value per unit or share granted in 2023 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 1.7 %, a risk-free interest rate from 4.4 % to 5.0 %, and an expected price volatility from 35.0 % to 46.0 %.

No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding as of June 30, 2023.

The following is a summary of ESRT restricted stock and LTIP unit activity for the six months ended June 30, 2023:

No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding as of September 30, 2023.

The following is a summary of ESRT restricted stock and LTIP unit activity for the nine months ended September 30, 2023:

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

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Forfeited or unearned ( 8,917 ) — ( 1,695,323 ) ( 3,795 ) 4.30

Unvested balance at June 30, 2023 614,435 3,260,529 3,012,210 1,278,196 $ 6.52

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

For award agreements that qualify, we recognize noncash compensation expense on the grant date for the time-based awards and ratably over the vesting period for the market-based and performance-based awards, and accordingly, we recognized $ 1.0 million and $ 1.7 million for the three and six months ended June 30, 2023, respectively, and $ 0.6 million and $ 1.6 million for the three and six months ended June 30, 2022, respectively.

Unrecognized compensation expense was $ 3.9 million at June 30, 2023, which will be recognized over a weighted average period of 2.6 years.

For the remainder of the LTIP unit and ESRT restricted stock awards, we recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized noncash compensation expense of $ 4.4 million and $ 8.1 million for the three and six months ended June 30, 2023, respectively, and $ 5.4 million and $ 8.9 million for the three and six months ended June 30, 2022, respectively.

Unrecognized compensation expense was $ 32.3 million at June 30, 2023, which will be recognized over a weighted average period of 2.7 years.

Unvested balance at September 30, 2023 609,663 3,297,550 3,005,200 1,276,363 $ 6.53

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 the requisite 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 $ 0.5 million and $ 2.2 million for the three and nine months ended September 30, 2023, respectively, and $ 0.4 million and $ 2.0 million for the three and nine months ended September 30, 2022, respectively.

Unrecognized compensation expense was $ 3.5 million at September 30, 2023, which will be recognized over a weighted average period of 2.5 years.

For the remainder of the LTIP unit and ESRT restricted stock awards, we recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized noncash compensation expense of $ 4.5 million and $ 12.6 million for the three and nine months ended September 30, 2023, respectively, and $ 4.8 million and $ 13.7 million for the three and nine months ended September 30, 2022, respectively.

Unrecognized compensation expense was $ 28.1 million at September 30, 2023, which will be recognized over a weighted average period of 2.5 years.

Earnings Per Unit

Earnings per unit for the three and six months ended June 30, 2023 and 2022 is computed as follows (amounts in thousands, except per share amounts):

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Earnings per unit is calculated by dividing the net income attributable to common unitholders by the weighted average number of units outstanding during the respective period.

Unvested share-based payment awards that contain non-forfeitable rights to dividends, whether paid or unpaid, are accounted for as participating securities.

Share-based payment awards are included in the calculation of diluted income using the treasury stock method if dilutive.

For the three and nine months ended September 30, 2023 and 2022, earnings per unit is computed as follows (amounts in thousands, except per share amounts):

Three Months Ended Nine Months Ended

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

Net income $ 19,928 $ 10,118 $ 68,577 $ 41,592

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Weighted average units outstanding –- diluted 266,073 267,121 265,269 270,966

Earnings per share:

Earnings per unit:

Basic $ 0.07 $ 0.03 $ 0.25 $ 0.14

Diluted $ 0.07 $ 0.03 $ 0.25 $ 0.14

There were zero antidilutive shares and LTIP units for the three and six months ended June 30, 2023, respectively, and 603 and 398 antidilutive shares and LTIP units for the three and six months ended June 30, 2022, respectively.

There were zero antidilutive shares and LTIP units for the three and nine months ended September 30, 2023, respectively, and zero antidilutive shares and LTIP units for the three and nine months ended September 30, 2022, respectively.

Related Party Transactions

Supervisory Fee Revenue

We earned supervisory fees from entities affiliated with Anthony E.

Malkin, our Chairman, President and Chief Executive Officer, of $ 0.3 million and $ 0.5 million for the three and six months ended June 30, 2023, respectively, and $ 0.3 million and $ 0.5 million for the three and six months ended June 30, 2022, respectively.

Since we became a public company, we have earned supervisory fees from entities affiliated with Anthony E.

Malkin, our Chairman, President and Chief Executive Officer.

These fees were $ 0.2 million and $ 0.7 million for the three and nine months ended September 30, 2023, respectively, and $ 0.2 million and $ 0.8 million for the three and nine months ended September 30, 2022, respectively.

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

Property Management Fee Revenue

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

Malkin of $ 0.05 million and $ 0.2 million for the three and six months ended June 30, 2023, respectively, and $ 0.1 million and $ 0.1 million for the three and six months ended June 30, 2022, respectively.

Since we became a public company, we have earned property management fees from entities affiliated with Anthony E.

These fees were $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2023, respectively, and $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2022, respectively.

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

We receive rent generally at the market rental rate for 5,447 square feet of leased space from entities affiliated with Anthony E.

We receive rent generally at the market rental rate for 5,447 square feet of leased space from an entity affiliated with Anthony E.

Malkin at one of our properties.

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

Total aggregate revenue was $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2023, respectively, and $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2022, respectively.

Total aggregate revenue was $ 0.1 million and $ 0.3 million for the three and nine months ended September 30, 2023, respectively, and $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2022, respectively.

As disclosed in greater detail in our Annual Report, 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 June 30, 2023, the amount outstanding under the loan is $ 0.1 million.

As of September 30, 2023, the loan has been fully paid.

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 six months ended June 30, 2023 and 2022 (amounts in thousands):

Three Months Ended June 30, 2023

The following tables provide components of segment net income for each segment for the three and nine months ended September 30, 2023 and 2022 (amounts in thousands):

Three Months Ended September 30, 2023

Real Estate Observatory Intersegment Elimination Total

18 unchanged sentences

Interest expense ( 25,382 ) — — ( 25,382 )

Gain on disposition of property 13,565 — — 13,565

Income before income taxes 15,338 5,999 — 21,337

3 unchanged sentences

Expenditures for segment assets $ 56,227 $ — $ — $ 56,227

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Real Estate Observatory Intersegment Elimination Total

2 unchanged sentences

Observatory revenue — 33,051 — 33,051

Lease termination fees 18,859 — — 18,859

Third-party management and other fees 389 — — 389

4 unchanged sentences

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

Ground rent expense 2,332 — — 2,332

Ground rent expenses 2,331 — — 2,331

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

7 unchanged sentences

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

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

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

3 unchanged sentences

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

Six Months June 30, 2023

Nine Months Ended September 30, 2023

Real Estate Observatory Intersegment Elimination Total

20 unchanged sentences

Income before income taxes 61,282 8,218 — 69,500

Income tax (expense) benefit ( 395 ) 881 — 486

Income tax expense ( 541 ) ( 382 ) — ( 923 )

Net income $ 60,741 $ 7,836 $ — $ 68,577

Expenditures for segment assets $ 123,671 $ 58 $ — $ 123,729

Six Months June 30, 2022

Nine Months Ended September 30, 2022

Real Estate Observatory Intersegment Elimination Total

26 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-Q

Item 1. Financial Statements