Acquisitions

2014 Acquisitions

On July 15, 2014, we acquired the ground and operating lease at 112 West 34th Street (and the fee title to 122 West 34th Street) for $423.6 million, consisting of $87.7 million by assumption of existing mortgage debt, $106.9 million in cash and $229.0 million in shares of Class A and Class B common stock and Series PR OP units. In connection with this transaction, we issued 1,217,685 shares of Class A common stock and 77,945 shares of Class B common stock at a share price of $16.65 and 12,457,379 Series PR OP Units at a unit price of $16.65.

On July 15, 2014, we acquired the ground lease at 1400 Broadway for $310.0 million, consisting of $80.0 million by assumption of existing mortgage debt, $79.7 million in cash and $150.3 million in shares of Class A and Class B common stock and Series PR OP units. In connection with this transaction, we issued 1,338,488 shares of Class A common stock and 32,452 shares of Class B common stock at a share price of $16.65 and 7,658,516 Series PR OP Units at a unit price of $16.65.

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, 2014, is 26.4 years, 4.9 years, 4.2 years and 4.4 years for below-market ground leases, 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 (amounts in thousands):



Consideration paid:
Cash and issuance of Class A Common Stock, Class B Common Stock, and Series PR OP units	$	565,916
Debt assumed	167,684
Total consideration paid	$	733,600

Net assets acquired:
Land and building and improvements	$	354,429
Acquired below-market ground leases	334,178
Acquired above-market leases	13,088
Acquired in place lease value and deferred leasing costs	88,374
Mortgage notes payable, inclusive of premium	(182,851		)
Acquired below-market leases	(36,553		)
Other liabilities, net of other assets	(4,749		)
Total net assets acquired	$	565,916

2013 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 following table is an allocation of the purchase price for the assets and liabilities acquired in the formation transactions (amounts in thousands).



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. No amount of goodwill is deductible for tax purposes.

The following summary of selected unaudited pro forma results of operations presents information as if the 2014 acquisitions had occurred on January 1, 2013 and the 2013 acquisitions 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 amounts).



	For the Year Ended December 31,
	2014		2013
Total revenues	$	671,952	$	652,150
Net income	$	68,594	$	9,689
Net income attributable to Empire State Realty Trust, Inc.	$	25,448	$	20,036
Net income attributable to Empire State Realty Trust, Inc. per share - basic and diluted	$	0.26	$	0.20

The following table summarizes the revenues and earnings related to all the acquired properties since the respective acquisition dates that are included in our consolidated statements of operations for the year ended December 31, 2014 and for the period October 7, 3013 through December 31, 2013 (amounts in thousands):



	2014		2013
Total revenues	$	392,615	$	76,989
Operating expenses	$	289,433	$	48,538
Operating income	$	103,182	$	28,451
Net income attributable to common stockholders	$	35,002	$	10,722