Acquisitions

On October 7, 2013, as discussed in Note 1, through the Offering and formation transactions we acquired the assets and liabilities of the four entities in which our predecessor held non-controlling interests. The contribution or acquisition of assets in these entities was accounted for as an acquisition under the acquisition method of accounting and recognized at the estimated fair value of acquired assets and assumed liabilities on the date of such contribution or acquisition. Prior to the acquisition, our predecessor had a 23.75%, 50.0%, 50.0%, and 20.469% non-controlling interest in Empire State Building Company, L.L.C., 1333 Broadway Associates, L.L.C., 1350 Broadway Associates, L.L.C., and 501 Seventh Avenue Associates, L.L.C., respectively.

Upon acquisition, we remeasured the assets and liabilities we acquired from the non-controlled entities at fair value and recorded gains of $214.3 million, which are classified as gain on consolidation of non-controlled entities in the accompanying statement of operations. This gain was calculated based on the difference between the total consideration value of our predecessor’s ownership interests of $302.7 million compared to our predecessor’s historical cost interests of $88.4 million. We determined that the fair values of the assets acquired from and assumed liabilities for 1333 Broadway Associates, L.L.C. and 1350 Broadway Associates, L.L.C. were greater than the consideration granted and we recorded gains of $41.0 million and $32.1 million, respectively, which were classified as gain on consolidation of non-controlled entities in the accompanying statement of operations. There are operating leases between one of our predecessor entities and Empire State Building Company, L.L.C. and 501 Seventh Avenue Associates, L.L.C. Based upon current market rates for similar arrangements, we determined that the current market rent would be less than the pre-existing contractual rent existing at the time of the Offering and formation transactions under the operating leases. Accordingly, upon elimination of the leasehold position and the related liability for the above-market leases, we recorded gains of $35.2 million, which are classified as gain on consolidation of non-controlled entities in the accompanying statement of operations.

The purchase price is allocated between net tangible and intangible assets based on their estimated fair values as determined by management using information available at the time the acquisition closed. The remaining weighted-average amortization period as of December 31, 2013, is 5.6 years, 4.7 years and 5.2 years for in-place leases and deferred leasing costs, above-market leases and below-market leases, respectively.

The following table is an allocation of the purchase price for the assets and liabilities acquired in the formation transactions (amounts in thousands). The fair value asset and liability allocations are preliminary and may be adjusted as final information becomes available.



Consideration paid:
Cash and issuance of Class A Common Stock, Class B Common Stock, and OP units	$	1,047,487
Debt assumed	124,354
Total consideration paid	$	1,171,841

Net assets acquired:
Land	$	91,435
Building and improvements	516,344
Acquired below-market ground lease	62,738
Acquired above-market leases	72,123
Acquired in place lease value and deferred leasing costs	186,415
Goodwill	491,479
Other assets, net of other liabilities	6,061
Mortgage notes payable	(136,226		)
Acquired below-market leases	(134,651		)
Total net assets acquired	$	1,155,718

Gain on the elimination of leasehold positions	$	35,147
Fair values of the assets acquired and assumed liabilities were greater than the consideration granted:
1333 Broadway Associates L.L.C.	40,962
1350 Broadway Associates L.L.C.	32,122
Total	$	108,231

We acquired Empire State Building Company, L.L.C. and 501 Seventh Avenue Associates, L.L.C. for an amount in excess of their net tangible and identified intangible assets and liabilities and as a result we recorded goodwill related to the transaction (see also Note 5). Goodwill was allocated $227.5 million to the observatory operations of the Empire State Building, $250.8 million to Empire State Building Company, L.L.C., and $13.2 million to 501 Seventh Avenue Associates, L.L.C.

We have included the results of operations for each of these acquired entities in our consolidated statements of operations from October 7, 2013, the date of acquisition. For the period October 7, 2013 through December 31, 2013, the acquired entities contributed $77.0 million to total revenue, $48.5 million to operating expenses, $28.5 million to operating income, and $27.6 million to net income.

The following summary of selected unaudited pro forma results of operations presents information as if the acquisitions, and the gain on consolidation of non-controlled entities of $322.6 million, had occurred on January 1, 2012. The unaudited pro forma information is provided for informational purposes only and is not indicative of results that would have occurred or which may occur in the future (amounts in thousands, expect per share amount):



	For the year ended December 31,
	2013		2012
Total revenues	$	563,878	$	549,707
Net income	18,992		311,434
Net income attributable to Empire State Realty Trust, Inc.	21,871		—
Net income attributable to Empire State Realty Trust, Inc. per share - basic and diluted	$	0.23	$	—