Segment Reporting

12 Months Ended

Dec. 31, 2019

We have identified two reportable segments: (1) Real Estate and (2) Observatory. Our real estate segment includes all activities related to the ownership, management, operation, acquisition, repositioning and disposition of our real estate assets. Our observatory segment operates the 86th and 102nd floor observatories at the Empire State Building. These two lines of businesses are managed separately because each business requires different support infrastructures, provides different services and has dissimilar economic characteristics such as investments needed, stream of revenues and different marketing strategies. 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 profit for each segment for the years ended December 31, 2019, 2018 and 2017, as reviewed by management (amounts in thousands):



	2019
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	586,414		$	—		$	—		$	586,414
Intercompany rental revenue	82,469			—			(82,469		)	—
Observatory revenue	—			128,769			—			128,769
Lease termination fees	4,352			—			—			4,352
Third-party management and other fees	1,254			—			—			1,254
Other revenue and fees	10,554			—			—			10,554
Total revenues	685,043			128,769			(82,469		)	731,343
Operating expenses:
Property operating expenses	174,977			—			—			174,977
Intercompany rent expense	—			82,469			(82,469		)	—
Ground rent expense	9,326			—			—			9,326
General and administrative expenses	61,063			—			—			61,063
Observatory expenses	—			33,767			—			33,767
Real estate taxes	115,916			—			—			115,916
Depreciation and amortization	181,558			30			—			181,588
Total operating expenses	542,840			116,266			(82,469		)	576,637
Total operating income	142,203			12,503			—			154,706
Other income (expense):
Interest income	11,259			—			—			11,259
Interest expense	(79,246		)	—			—			(79,246		)
Income before income taxes	74,216			12,503			—			86,719
Income tax expense	(896		)	(1,533		)	—			(2,429		)
Net income	$	73,320		$	10,970		$	—		$	84,290
Segment assets	$	3,671,211		$	260,623		$	—		$	3,931,834
Expenditures for segment assets	$	191,630		$	64,294		$	—		$	255,924



	2018
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	493,231		$	—		$	—		$	493,231
Intercompany rental revenue	79,954			—			(79,954		)	—
Tenant expense reimbursement	72,372			—			—			72,372
Observatory revenue	—			131,227			—			131,227
Lease termination fees	20,847			—			—			20,847
Third-party management and other fees	1,440			—			—			1,440
Other revenue and fees	12,394			—			—			12,394
Total revenues	680,238			131,227			(79,954		)	731,511
Operating expenses:
Property operating expenses	167,379			—			—			167,379
Intercompany rent expense	—			79,954			(79,954		)	—
Ground rent expense	9,326			—			—			9,326
General and administrative expenses	52,674			—			—			52,674
Observatory expenses	—			32,767			—			32,767
Real estate taxes	110,000			—			—			110,000
Depreciation and amortization	168,430			78			—			168,508
Total operating expenses	507,809			112,799			(79,954		)	540,654
Total operating income	172,429			18,428			—			190,857
Other income (expense):
Interest income	10,661			—			—			10,661
Interest expense	(79,623		)	—			—			(79,623		)
Loss on early extinguishment of debt	—			—			—			—
Loss from derivative financial instrument	—			—			—			—
Income before income taxes	103,467			18,428			—			121,895
Income tax expense	(1,114		)	(3,528		)	—			(4,642		)
Net income	$	102,353		$	14,900		$	—		$	117,253
Segment assets	$	3,930,330		$	265,450		$	—		$	4,195,780
Expenditures for segment assets	$	201,685		$	54,811		$	—		$	256,496



	2017
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	483,944		$	—		$	—		$	483,944
Intercompany rental revenue	77,646			—			(77,646		)	—
Tenant expense reimbursement	73,679			—			—			73,679
Observatory revenue	—			127,118			—			127,118
Lease termination fees	13,551			—			—			13,551
Third-party management and other fees	1,400			—			—			1,400
Other revenue and fees	9,834			—			—			9,834
Total revenues	660,054			127,118			(77,646		)	709,526
Operating expenses:
Property operating expenses	163,531			—			—			163,531
Intercompany rent expense	—			77,646			(77,646		)	—
Ground rent expense	9,326			—			—			9,326
General and administrative expenses	50,315			—			—			50,315
Observatory expenses	—			30,275			—			30,275
Real estate taxes	102,466			—			—			102,466
Acquisition expenses	—			—			—			—
Depreciation and amortization	160,630			80			—			160,710
Total operating expenses	486,268			108,001			(77,646		)	516,623
Total operating income	173,786			19,117			—			192,903
Other income (expense):
Interest income	2,942			—			—			2,942
Interest expense	(68,473		)	—			—			(68,473		)
Loss on early extinguishment of debt	(2,157		)	—			—			(2,157		)
Loss from derivative financial instrument	(289		)	—			—			(289		)
Income before income taxes	105,809			19,117			—			124,926
Income tax expense	(1,306		)	(5,367		)	—			(6,673		)
Net income	$	104,503		$	13,750		$	—		$	118,253
Segment assets	$	3,670,907		$	260,440		$	—		$	3,931,347
Expenditures for segment assets	$	191,541		$	36,621		$	—		$	228,162