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Purchase of Fee Title to The Empire State Building and Land Thereunder, Mortgage Debt, and Related Depreciation and Amortization
6 Months Ended
Jun. 30, 2011
Purchase of Fee Title to The Empire State Building and Land Thereunder, Mortgage Debt, and Related Depreciation and Amortization [Abstract]  
Purchase of Fee Title to The Empire State Building and Land Thereunder, Mortgage Debt, and Related Depreciation and Amortization
Note C Purchase of Fee Title to The Empire State Building and Land Thereunder, Mortgage Debt, and Related Depreciation and Amortization
On April 17, 2002, Registrant acquired, through a wholly-owned limited liability company (Empire State Land Associates L.L.C.) the fee title to the building known as the Empire State Building at 350 Fifth Avenue in New York (the “Building”), and the land thereunder (the “Land”) (together, the “Real Estate” or “Property”), at a price of $57,500,000, and obtained a $60,500,000 first mortgage (the “First Mortgage”) with Capital One Bank to finance the acquisition and certain related costs.
The Real Estate is carried in the financial statements at its historical cost of $60,484,389, consisting of $57,500,000 for the purchase price paid to the seller, $752,022 for acquisition costs, and $2,232,367 representing the unamortized balance of the cost of the Master Lease on the date the Real Estate was acquired. The cost of the Land was estimated to be 35.63% of the total cost of the Real Estate, and the Building 64.37%. Under the terms of the contract of sale, the deed contains language to avoid the merger of the fee estate and the leasehold, although on a consolidated financial statement basis Registrant incurred no leasehold rent expense after acquiring the Real Estate.
On July 26, 2011 Registrant closed on a new mortgage loan with HSBC Bank USA (“New Mortgage”) and other participating banks with an initial advance of $159,000,000 to be used to pay and discharge all existing mortgage loans including the First and the Second Mortgages, both of which were repaid, the New Mortgage secured by a lien on the Real Estate and Registrant’s leasehold estate under the Master Lease of the Real Estate, to fund operations and working capital requirements relating to the Property (including for improvements) and certain other general purposes. The First Mortgage was scheduled to mature on May 1, 2012 and required monthly payments of interest only at 6.5% per annum. The First Mortgage was secured by a lien on the Real Estate and Registrant’s leasehold estate under the Master Lease of the Real Estate.
To finance improvements at the Property and costs of the financing, on February 25, 2009 Registrant borrowed $31,500,000 from Signature Bank (the “Second Mortgage”). The Second Mortgage was also scheduled to mature on May 1, 2012 and required monthly payments of interest only at 6.5% per annum. The First Mortgage and Second Mortgage loans aggregating $92,000,000 plus accrued interest and applicable prepayment penalties were prepaid on July 26, 2011 out of proceeds from the new $159,000,000 financing described above.
The estimated fair value of Registrant’s total mortgage debt based upon available market information was $93,947,055 at June 30, 2011.
Restricted cash at June 30, 2011 represents funds in an interest-bearing account held at Capital One Bank pursuant to the terms of the First Mortgage, to be used monthly to satisfy a portion ($166,667) of Registrant’s First Mortgage interest obligation. On March 24, 2011, Registrant deposited an additional $2,000,000 into this restricted account under the same conditions.
The Building and Building improvements are being depreciated on the straight-line basis over their estimated useful lives of 39 years. Mortgage financing costs, totaling $3,358,658, are being amortized ratably over the lives of the respective mortgages. As the mortgages were prepaid on July 26, 2011, the remaining unamortized balance will be written-off in the third quarter of 2011.