10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number: 001-36105

EMPIRE STATE REALTY TRUST, INC.

(Exact name of Registrant as specified in its charter)

Maryland	37-1645259
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

111 West 33rd Street, 12th Floor

New York, New York 10120

(Address of principal executive offices) (Zip Code)

(212) 687-8700

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Securities	Trading Symbol	Exchange on which traded
Class A Common Stock, par value $0.01 per share	ESRT	The New York Stock Exchange
Class B Common Stock, par value $0.01 per share	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒     No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of October 30, 2020, there were 170,950,356 shares of Class A Common Stock, $0.01 par value per share, outstanding and 1,010,832 shares of Class B Common Stock, $0.01 par value per share, outstanding.

	EMPIRE STATE REALTY TRUST, INC.
	FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2020
	TABLE OF CONTENTS	PAGE
PART 1.	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
	Condensed Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019	2
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019 (unaudited)	4
	Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2020 and 2019 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	52
ITEM 4.	CONTROLS AND PROCEDURES	52
PART II.	OTHER INFORMATION	53
ITEM 1.	LEGAL PROCEEDINGS	53
ITEM 1A.	RISK FACTORS	53
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	53
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	54
ITEM 4.	MINE SAFETY DISCLOSURES	55
ITEM 5.	OTHER INFORMATION	55
ITEM 6.	EXHIBITS	55
SIGNATURES		56

1

ITEM 1. FINANCIAL STATEMENTS

Empire State Realty Trust, Inc.

Condensed Consolidated Balance Sheets

(amounts in thousands, except share and per share amounts)

	September 30, 2020			December 31, 2019
ASSETS	(unaudited)
Commercial real estate properties, at cost:
Land	$	201,196		$	201,196
Development costs	7,938			7,989
Building and improvements	2,925,532			2,900,248
	3,134,666			3,109,433
Less: accumulated depreciation	(927,517		)	(862,534		)
Commercial real estate properties, net	2,207,149			2,246,899
Cash and cash equivalents	373,088			233,946
Restricted cash	54,865			37,651
Tenant and other receivables	25,853			25,423
Deferred rent receivables	223,886			220,960
Prepaid expenses and other assets	50,773			65,453
Deferred costs, net	207,774			228,150
Acquired below-market ground leases, net	346,693			352,566
Right of use assets	29,154			29,307
Goodwill	491,479			491,479
Total assets	$	4,010,714		$	3,931,834
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net	$	603,178		$	605,542
Senior unsecured notes, net	973,106			798,392
Unsecured term loan facilities, net	387,309			264,640
Unsecured revolving credit facility, net	—			—
Accounts payable and accrued expenses	111,918			143,786
Acquired below-market leases, net	33,405			39,679
Ground lease liabilities	29,154			29,307
Deferred revenue and other liabilities	77,572			72,015
Tenants’ security deposits	51,257			30,560
Total liabilities	2,266,899			1,983,921
Commitments and contingencies
Equity:
Empire State Realty Trust, Inc. stockholders' equity:
Preferred stock, $0.01 par value per share, 50,000,000 shares authorized, none issued or outstanding	—			—
Class A common stock, $0.01 par value per share, 400,000,000 shares authorized, 171,981,257 shares issued and outstanding and 180,877,597 shares issued and outstanding in 2020 and 2019, respectively	1,719			1,809
Class B common stock, $0.01 par value per share, 50,000,000 shares authorized, 1,010,832 and 1,016,799 shares issued and outstanding in 2020 and 2019, respectively	10			10
Additional paid-in capital	1,161,871			1,232,433
Accumulated other comprehensive loss	(30,038		)	(21,496		)
Retained (deficit) earnings	(64,293		)	15,764
Total Empire State Realty Trust, Inc.'s stockholders' equity	1,069,269			1,228,520
Non-controlling interests in operating partnership	644,606			690,242
Private perpetual preferred units:
Private perpetual preferred units, $13.52 per unit liquidation preference, 4,664,038 and 4,610,383 issued and outstanding in 2020 and 2019, respectively	21,936			21,147
Private perpetual preferred units, $16.62 per unit liquidation preference, 1,560,360 issued and outstanding in 2020 and 2019	8,004			8,004
Total equity	1,743,815			1,947,913
Total liabilities and equity	$	4,010,714		$	3,931,834

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

2

Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(amounts in thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenues:
Rental revenue	$	139,909		$	150,225		$	426,021		$	434,713
Observatory revenue	4,419			37,575			24,049			91,039
Lease termination fees	331			2,361			1,575			3,112
Third-party management and other fees	283			304			930			955
Other revenue and fees	1,633			2,408			5,254			6,591
Total revenues	146,575			192,873			457,829			536,410
Operating expenses:
Property operating expenses	33,836			47,894			105,054			131,076
Ground rent expenses	2,331			2,331			6,994			6,994
General and administrative expenses	14,517			14,421			48,617			44,445
Observatory expenses	5,931			9,089			18,087			25,024
Real estate taxes	31,196			29,599			90,029			86,098
Impairment charges	2,103			—			6,204			—
Depreciation and amortization	44,733			44,260			143,609			135,179
Total operating expenses	134,647			147,594			418,594			428,816
Total operating income	11,928			45,279			39,235			107,594
Other income (expense):
Interest income	366			2,269			2,529			9,907
Interest expense	(23,360		)	(19,426		)	(66,906		)	(60,712		)
Loss on early extinguishment of debt	—			—			(86		)	—
IPO litigation expense	(1,165		)	—			(1,165		)	—
Income (loss) before income taxes	(12,231		)	28,122			(26,393		)	56,789
Income tax benefit (expense)	(38		)	(1,338		)	2,794			(1,219		)
Net income (loss)	(12,269		)	26,784			(23,599		)	55,570
Private perpetual preferred unit distributions	(1,050		)	(234		)	(3,147		)	(702		)
Net (income) loss attributable to non-controlling interests	5,115			(10,668		)	10,244			(22,222		)
Net income (loss) attributable to common stockholders	$	(8,204	)	$	15,882		$	(16,502	)	$	32,646
Total weighted average shares:
Basic	173,048			178,352			176,299			177,428
Diluted	280,940			298,151			285,640			298,117
Earnings per share attributable to common stockholders:
Basic	$	(0.05	)	$	0.09		$	(0.09	)	$	0.18
Diluted	$	(0.05	)	$	0.09		$	(0.09	)	$	0.18
Dividends per share	$	—		$	0.105		$	0.210		$	0.315

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

3

Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

(amounts in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Net income (loss)	$	(12,269	)	$	26,784		$	(23,599	)	$	55,570
Other comprehensive income (loss):
Unrealized gain (loss) on valuation of interest rate swap agreements	64			(6,256		)	(19,340		)	(25,992		)
Less: amount reclassified into interest expense	2,873			319			5,986			637
Other comprehensive income (loss)	2,937			(5,937		)	(13,354		)	(25,355		)
Comprehensive income (loss)	(9,332		)	20,847			(36,953		)	30,215
Net income attributable to non-controlling interests and private perpetual preferred unitholders	4,065			(10,902		)	7,097			(22,924		)
Other comprehensive (income) loss attributable to non-controlling interests	(1,060		)	2,347			5,114			10,269
Comprehensive income (loss) attributable to common stockholders	$	(6,327	)	$	12,292		$	(24,742	)	$	17,560

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

4

Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Stockholders' Equity

For The Three Months Ended September 30, 2020 and 2019

(unaudited)

(amounts in thousands)

	Number of Class A Common Shares		Class A Common Stock			Number of Class B Common Shares		Class B Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained (Deficit) Earnings			Total Stockholders' Equity			Non-controlling Interests			Private Perpetual Preferred Units			Total Equity
Balance at June 30, 2020	172,333		$	1,723		1,014		$	10	$	1,166,451		$	(31,874	)	$	(56,089	)	$	1,080,221		$	645,877		$	29,940		$	1,756,038
Conversion of operating partnership units and Class B shares to Class A shares	782		8			(3	)	—		2,419			(41		)	—			2,386			(2,386		)	—			—
Repurchases of common shares	(1,134	)	(12		)	—		—		(7,333		)	—			—			(7,345		)	—			—			(7,345		)
Equity compensation:																			—									—
LTIP units	—		—			—		—		—			—			—			—			5,170			—			5,170
Restricted stock, net of forfeitures	—		—			—		—		334			—			—			334			—			—			334
Dividends and distributions	—		—			—		—		—			—			—			—			—			(1,050		)	(1,050		)
Net income	—		—			—		—		—			—			(8,204		)	(8,204		)	(5,115		)	1,050			(12,269		)
Other comprehensive income (loss)	—		—			—		—		—			1,877			—			1,877			1,060			—			2,937
Balance at September 30, 2020	171,981		$	1,719		1,011		$	10	$	1,161,871		$	(30,038	)	$	(64,293	)	$	1,069,269		$	644,606		$	29,940		$	1,743,815

	Number of Class A Common Shares		Class A Common Stock		Number of Class B Common Shares		Class B Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Stockholders' Equity			Non-controlling Interests			Private Perpetual Preferred Units			Total Equity
Balance at June 30, 2019	176,991		$	1,770	1,030		$	10	$	1,213,170	$	(20,387	)	$	21,084		$	1,215,647		$	724,381		$	8,004		$	1,948,032
Conversion of operating partnership units and Class B shares to Class A shares	2,141		21		(11	)	—		12,908		(133		)	—			12,796			(12,796		)	—			—
Equity compensation:																	—									—
LTIP units	—		—		—		—		—		—			—			—			3,456			—			3,456
Restricted stock, net of forfeitures	(1	)	—		—		—		191		—			—			191			—			—			191
Dividends and distributions	—		—		—		—		—		—			(18,907		)	(18,907		)	(13,039		)	(234		)	(32,180		)
Net income	—		—		—		—		—		—			15,882			15,882			10,668			234			26,784
Other comprehensive income (loss)	—		—		—		—		—		(3,590		)	—			(3,590		)	(2,347		)	—			(5,937		)
Balance at September 30, 2019	179,131		$	1,791	1,019		$	10	$	1,226,269	$	(24,110	)	$	18,059		$	1,222,019		$	710,323		$	8,004		$	1,940,346

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

5

Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Stockholders' Equity

For The Nine Months Ended September 30, 2020 and 2019

(unaudited)

(amounts in thousands)

	Number of Class A Common Shares		Class A Common Stock			Number of Class B Common Shares		Class B Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained (Deficit) Earnings			Total Stockholders' Equity			Non-controlling Interests			Private Perpetual Preferred Units			Total Equity
Balance at December 31, 2019	180,878		$	1,809		1,017		$	10	$	1,232,433		$	(21,496	)	$	15,764		$	1,228,520		$	690,242		$	29,151		$	1,947,913
Issuance of private perpetual in exchange for common shares	—		—			—		—		—			—			—			—			(789		)	789			—
Conversion of operating partnership units and Class B shares to Class A shares	5,160		52			(6	)	—		24,153			(302		)	—			23,903			(23,903		)	—			—
Repurchases of common shares	(14,205	)	(142		)	—		—		(95,434		)	—			(26,374		)	(121,950		)	—			—			(121,950		)
Equity compensation:
LTIP units	—		—			—		—		—			—			—			—			19,455			—			19,455
Restricted stock, net of forfeitures	148		—			—		—		719			—			—			719			—			—			719
Dividends and distributions	—		—			—		—		—			—			(37,181		)	(37,181		)	(25,041		)	(3,147		)	(65,369		)
Net income	—		—			—		—		—			—			(16,502		)	(16,502		)	(10,244		)	3,147			(23,599		)
Other comprehensive income (loss)	—		—			—		—		—			(8,240		)	—			(8,240		)	(5,114		)	—			(13,354		)
Balance at September 30, 2020	171,981		$	1,719		1,011		$	10	$	1,161,871		$	(30,038	)	$	(64,293	)	$	1,069,269		$	644,606		$	29,940		$	1,743,815

	Number of Class A Common Shares	Class A Common Stock		Number of Class B Common Shares		Class B Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Stockholders' Equity			Non-controlling Interests			Private Perpetual Preferred Units			Total Equity
Balance at December 31, 2018	173,874	$	1,739	1,038		$	10	$	1,204,075	$	(8,853	)	$	41,511		$	1,238,482		$	744,623		$	8,004		$	1,991,109
Conversion of operating partnership units and Class B shares to Class A shares	5,204	52		(19	)	—		21,773		(171		)	—			21,654			(21,654		)	—			—
Equity compensation:
LTIP units	—	—		—		—		—		—			—			—			14,971			—			14,971
Restricted stock, net of forfeitures	53	—		—		—		421		—			—			421			—			—			421
Dividends and distributions	—	—		—		—		—		—			(56,098		)	(56,098		)	(39,570		)	(702		)	(96,370		)
Net income	—	—		—		—		—		—			32,646			32,646			22,222			702			55,570
Other comprehensive income (loss)	—	—		—		—		—		(15,086		)	—			(15,086		)	(10,269		)	—			(25,355		)
Balance at September 30, 2019	179,131	$	1,791	1,019		$	10	$	1,226,269	$	(24,110	)	$	18,059		$	1,222,019		$	710,323		$	8,004		$	1,940,346

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

6

Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(amounts in thousands)

	Nine Months Ended September 30,
	2020			2019
Cash Flows From Operating Activities
Net income (loss)	$	(23,599	)	$	55,570
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	143,609			135,179
Impairment charges	6,204			—
Amortization of non-cash items within interest expense	6,803			5,400
Amortization of acquired above- and below-market leases, net	(2,953		)	(5,780		)
Amortization of acquired below-market ground leases	5,873			5,873
Straight-lining of rental revenue	(5,878		)	(13,781		)
Equity based compensation	20,174			15,392
Settlement of derivative contract	(20,281		)	—
Loss on early extinguishment of debt	86			—
Increase (decrease) in cash flows due to changes in operating assets and liabilities:
Security deposits	20,697			(25,961		)
Tenant and other receivables	(431		)	149
Deferred leasing costs	(8,241		)	(14,513		)
Prepaid expenses and other assets	14,680			19,883
Accounts payable and accrued expenses	(1,699		)	(2,970		)
Deferred revenue and other liabilities	8,509			23,932
Net cash provided by operating activities	163,553			198,373
Cash Flows From Investing Activities
Short-term investments	—			400,000
Development costs	(1,336		)	(2		)
Additions to building and improvements	(112,018		)	(189,666		)
Net cash (used in) provided by investing activities	(113,354		)	210,332

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

7

Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(unaudited)

(amounts in thousands)

	Nine Months Ended September 30,
	2020			2019
Cash Flows From Financing Activities
Repayment of mortgage notes payable	(2,939		)	(2,829		)
Proceeds from unsecured senior notes	175,000			—
Repayment of unsecured senior notes	—			(250,000		)
Proceeds from unsecured term loan	175,000			—
Repayment of unsecured term loan	(50,000		)	—
Proceeds from unsecured revolving credit facility	550,000			—
Repayment of unsecured revolving credit facility	(550,000		)	—
Deferred financing costs	(3,585		)	—
Repurchases of common shares	(121,950		)	—
Private perpetual preferred unit distributions	(3,147		)	(702		)
Dividends paid to common stockholders	(37,181		)	(56,098		)
Distributions paid to non-controlling interests in the operating partnership	(25,041		)	(39,570		)
Net cash provided by (used in) financing activities	106,157			(349,199		)
Net increase in cash and cash equivalents and restricted cash	156,356			59,506
Cash and cash equivalents and restricted cash—beginning of period	271,597			270,813
Cash and cash equivalents and restricted cash—end of period	$	427,953		$	330,319
Reconciliation of Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents at beginning of period	$	233,946		$	204,981
Restricted cash at beginning of period	37,651			65,832
Cash and cash equivalents and restricted cash at beginning of period	$	271,597		$	270,813
Cash and cash equivalents at end of period	$	373,088		$	293,710
Restricted cash at end of period	54,865			36,609
Cash and cash equivalents and restricted cash at end of period	$	427,953		$	330,319
Supplemental disclosures of cash flow information:
Cash paid for interest	$	57,170		$	59,173
Cash paid for income taxes	$	1,197		$	1,589
Non-cash investing and financing activities:
Building and improvements included in accounts payable and accrued expenses	$	63,984		$	77,142
Write-off of fully depreciated assets	54,992			26,516
Derivative instruments at fair values included in accounts payable and accrued expenses	10,222			28,850
Conversion of operating partnership units and Class B shares to Class A shares	23,903			21,654
Issuance of Series 2019 private perpetual preferred in exchange for common shares	789			—
Right of use assets	—			29,452
Ground lease liabilities	—			29,452

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

8

Empire State Realty Trust, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Description of Business and Organization

As used in these condensed consolidated financial statements, unless the context otherwise requires, “we,” “us,” “our,” the “company,” and "ESRT" mean Empire State Realty Trust, Inc. and its consolidated subsidiaries.

    We are a self-administered and self-managed real estate investment trust ("REIT") that owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area.

As of September 30, 2020, our total portfolio contained 10.1 million rentable square feet of office and retail space. We owned 14 office properties (including three long-term ground leasehold interests) encompassing approximately 9.4 million rentable square feet of office space. Nine of these properties are located in the midtown Manhattan market and aggregate approximately 7.6 million rentable square feet of office space, including the Empire State Building. Our Manhattan office 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 five office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing in the aggregate approximately 1.8 million rentable square feet. The majority of square footage for these five properties is 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 September 30, 2020, our portfolio included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing approximately 0.2 million rentable square feet in the aggregate.

We were organized as a Maryland corporation on July 29, 2011 and commenced operations upon completion of our initial public offering and related formation transactions on October 7, 2013. Our operating partnership, Empire State Realty OP, L.P. (the "Operating Partnership"), holds substantially all of our assets and conducts substantially all of our business. As of September 30, 2020, we owned approximately 60.0% of the aggregate operating partnership units in the Operating Partnership. We, as the sole general partner in the Operating Partnership, have responsibility and discretion in the management and control of the Operating Partnership, and the limited partners in the Operating Partnership, in such capacity, have no authority to transact business for, or participate in the management activities of, the Operating Partnership. Accordingly, the Operating Partnership has been consolidated by us. We elected to be taxed as a REIT and operate in a manner that we believe allows us to qualify as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2013.

2. Summary of Significant Accounting Policies

There have been no material changes to the summary of significant accounting policies included in the section entitled "Summary of Significant Accounting Policies" in our December 31, 2019 Annual Report on Form 10-K.

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. In the opinion of management, all adjustments and eliminations (including intercompany balances and transactions), consisting of normal recurring adjustments, considered necessary for the fair presentation of the financial statements have been included.

    The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the corresponding full years. These financial statements should be read in conjunction with the financial statements and accompanying notes included in the financial statements for the year ended December 31, 2019 contained in our Annual Report on Form 10-K. We do not consider our business to be subject to material seasonal fluctuations, except that our observatory business is subject to tourism seasonality and currently impacted by the COVID-19 pandemic. Historically, approximately

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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.

We consolidate entities in which we have a controlling financial interest.  In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members.  For variable interest entities ("VIE"), we consolidate the entity if we are deemed to have a variable interest in the entity and through that interest we are deemed the primary beneficiary. The primary beneficiary of a VIE is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. The primary beneficiary is required to consolidate the VIE. The Operating Partnership is a variable interest entity of our company, Empire State Realty Trust, Inc.  As the Operating Partnership is already consolidated in the financial statements of Empire State Realty Trust, Inc., the identification of this entity as a variable interest entity has no impact on our consolidated financial statements.

We will assess the accounting treatment for each investment we may have in the future. This assessment will include a review of each entity’s organizational agreement to determine which party has what rights and whether those rights are protective or participating. For all VIEs, we will review such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity’s economic performance and benefit. In situations where we or our partner could approve, among other things, the annual budget, or leases that cover more than a nominal amount of space relative to the total rentable space at each property, we would not consolidate the investment as we consider these to be substantive participation rights that result in shared power of the activities that would most significantly impact the performance and benefit of such joint venture investment.

A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests are required to be presented as a separate component of equity in the condensed consolidated balance sheets and in the condensed consolidated statements of operations by requiring earnings and other comprehensive income to be attributed to controlling and non-controlling interests.

Accounting Estimates

The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to use estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Significant items subject to such estimates and assumptions include allocation of the purchase price of acquired real estate properties among tangible and intangible assets, determination of the useful life of real estate properties and other long-lived assets, valuation and impairment analysis of commercial real estate properties, right of use assets and other long-lived and indefinite lived assets, estimate of tenant expense reimbursements, valuation of the allowance for doubtful accounts, and valuation of derivative instruments, ground lease liabilities, senior unsecured notes, mortgage notes payable, unsecured term loan and revolving credit facilities, and equity based compensation. These estimates are prepared using management’s best judgment, after considering past, current, and expected events and economic conditions. Actual results could differ from those estimates.

Revenue Recognition

For Coronavirus 2019 (“COVID-19”) pandemic related rent deferral agreements, we will generally elect to record rental revenue and a receivable during the deferral period.

Recently Issued or Adopted Accounting Standards

During April 2020, the Financial Accounting Standards Board ("FASB") staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 global pandemic. Under existing lease guidance, the entity would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant, which would be accounted for under the lease modification framework, or if a lease concession was under the enforceable rights and obligations that existed in the original lease, which would be accounted for outside the lease modification framework. The Lease Modification Q&A provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease. This election is only available when total cash flows resulting from the modified lease are substantially similar to the cash flows in the original lease.

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During March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

During January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which contain amendments that modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Because these amendments eliminate Step 2 from the goodwill impairment test, they should reduce the cost and complexity of evaluating goodwill for impairment. ASU No. 2017-04 should be applied on a prospective basis and the amendments adopted for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We adopted this standard and related amendments on January 1, 2020 and such adoption did not have a material impact our consolidated financial statements.

During June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which contains amendments that replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. During November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment of receivables arising from operating leases should be accounted in accordance with ASU No. 2016-02, Leases (Topic 842). ASU No. 2016-13 and ASU No. 2018-19 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Earlier adoption as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, is permitted. The amendments must be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified retrospective approach). We adopted these standards on January 1, 2020 and such adoption did not have a material impact our consolidated financial statements.

3. Deferred Costs, Acquired Lease Intangibles and Goodwill

Deferred costs, net, consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):  

	September 30, 2020			December 31, 2019
Leasing costs	$	200,684		$	199,033
Acquired in-place lease value and deferred leasing costs	186,766			200,296
Acquired above-market leases	44,449			49,213
	431,899			448,542
Less: accumulated amortization	(226,802		)	(224,598		)
Total deferred costs, net, excluding net deferred financing costs	$	205,097		$	223,944

At September 30, 2020 and December 31, 2019, $2.7 million and $4.2 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 sheet.

Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $5.4 million and $6.2 million for the three months ended September 30, 2020 and 2019, respectively, and $17.7 million and $18.3 million for the nine months ended September 30, 2020 and 2019, respectively. Amortization expense related to acquired lease intangibles was $1.5 million and $2.4 million for the three months ended September 30, 2020 and 2019, respectively, and $5.9 million and $8.2 million for the nine months ended September 30, 2020 and 2019, respectively.

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Amortizing acquired intangible assets and liabilities consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020			December 31, 2019
Acquired below-market ground leases	$	396,916		$	396,916
Less: accumulated amortization	(50,223		)	(44,350		)
Acquired below-market ground leases, net	$	346,693		$	352,566

	September 30, 2020			December 31, 2019
Acquired below-market leases	$	(82,891	)	$	(100,472	)
Less: accumulated amortization	49,486			60,793
Acquired below-market leases, net	$	(33,405	)	$	(39,679	)

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $0.7 million and $1.7 million for the three months ended September 30, 2020 and 2019, respectively, and $3.0 million and $5.8 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, 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 segment.

In compliance with the requirements of authorities, we closed the Empire State Building Observatory on March 16, 2020 due to the COVID-19 pandemic and it remained closed until the 86th floor observation deck was reopened on July 20, 2020. The 102nd observation deck was reopened on August 24, 2020. The closure of our Observatory and subsequent reopening under international, national, and local travel restrictions and quarantines caused us during the quarter to choose to perform an impairment test related to goodwill. We engaged a third-party valuation consulting firm to perform the valuation process. Based upon the results of the goodwill impairment test of the stand-alone Observatory reporting unit, which is after the intercompany rent expense paid to the Real Estate reporting unit, we determined that the fair value of the Observatory reporting unit exceeded its carrying value by less than 5.0%.  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 and that continued assessment may again utilize a third-party valuation consulting firm.

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4. Debt

Debt consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

	Principal Balance						As of September 30, 2020
	September 30, 2020			December 31, 2019			Stated Rate		Effective Rate(1)		Maturity Date(2)
Mortgage debt collateralized by:
Fixed rate mortgage debt
Metro Center	$	87,957		$	89,650		3.59	%	3.67	%	11/5/2024
10 Union Square	50,000			50,000			3.70	%	3.97	%	4/1/2026
1542 Third Avenue	30,000			30,000			4.29	%	4.53	%	5/1/2027
First Stamford Place(3)	180,000			180,000			4.28	%	4.77	%	7/1/2027
1010 Third Avenue and 77 West 55th Street	37,673			38,251			4.01	%	4.21	%	1/5/2028
10 Bank Street	32,252			32,920			4.23	%	4.36	%	6/1/2032
383 Main Avenue	30,000			30,000			4.44	%	4.55	%	6/30/2032
1333 Broadway	160,000			160,000			4.21	%	4.29	%	2/5/2033
Total mortgage debt	607,882			610,821
Senior unsecured notes:(4)
Series A	100,000			100,000			3.93	%	3.96	%	3/27/2025
Series B	125,000			125,000			4.09	%	4.12	%	3/27/2027
Series C	125,000			125,000			4.18	%	4.21	%	3/27/2030
Series D	115,000			115,000			4.08	%	4.11	%	1/22/2028
Series E	160,000			160,000			4.26	%	4.27	%	3/22/2030
Series F	175,000			175,000			4.44	%	4.45	%	3/22/2033
Series G	100,000			—			3.61	%	4.89	%	3/17/2032
Series H	75,000			—			3.73	%	5.00	%	3/17/2035
Unsecured revolving credit facility (4)	—			—			LIBOR plus 1.10%		2.03	%	8/29/2021
Unsecured term loan facility (4)	215,000			265,000			LIBOR plus 1.20%		3.77	%	3/19/2025
Unsecured term loan facility (4)	175,000			—			LIBOR plus 1.50%		2.99	%	12/31/2026
Total principal	1,972,882			1,675,821
Deferred financing costs, net	(9,289		)	(7,247		)
Total	$	1,963,593		$	1,668,574

______________

(1) The effective rate is the yield as of September 30, 2020 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 $16 million loan bearing interest at 6.25%.

(4) At September 30, 2020, we were in compliance with all debt covenants.

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Principal Payments

Aggregate required principal payments at September 30, 2020 are as follows (amounts in thousands):

Year	Amortization		Maturities		Total
2020	$	998	$	—	$	998
2021	4,090		—		4,090
2022	5,628		—		5,628
2023	7,876		—		7,876
2024	7,958		77,675		85,633
Thereafter	25,909		1,842,748		1,868,657
Total	$	52,459	$	1,920,423	$	1,972,882

Deferred Financing Costs

Deferred financing costs, net, consisted of the following at September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020			December 31, 2019
Financing costs	$	28,814		$	25,315
Less: accumulated amortization	(16,848		)	(13,863		)
Total deferred financing costs, net	$	11,966		$	11,452

At September 30, 2020 and December 31, 2019, $2.7 million and $4.2 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 sheet.

Amortization expense related to deferred financing costs was $1.0 million and $0.9 million for the three months ended September 30, 2020 and 2019, respectively, and $3.0 million and $2.9 million for the nine months ended September 30, 2020 and 2019, respectively.

Unsecured Revolving Credit and Term Loan Facilities

On March 19, 2020, through our Operating Partnership, we entered into an amendment to an existing credit agreement with the lenders party thereto, Bank of America, N.A., as administrative agent, and Bank of America, Wells Fargo Bank, National Association and Capital One, National Association, as the letter of credit issuers party thereto. The amendment amends the amended and restated senior unsecured revolving credit and term loan facility, entered into as of August 29, 2017, with Bank of America, N.A., as administrative agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC as Joint Lead Arrangers and Joint Bookrunners, Wells Fargo, National Association and Capital One, National Association, as co-syndication agents, and the lenders party thereto.

This new amended and restated senior unsecured revolving credit and term loan facility (the "Credit Facility") is in the original principal amount of up to $1.315 billion, which consists of a $1.1 billion revolving credit facility and a $215.0 million term loan facility. We borrowed the term loan facility in full at closing. We may request the Credit Facility be increased through one or more increases in the revolving credit facility or one or more increases in the term loan facility or the addition of new pari passu term loan tranches, for a maximum aggregate principal amount not to exceed $1.75 billion. As of September 30, 2020, we had no borrowings under the revolving credit facility and $215.0 million under the term loan facility.

The initial maturity of the unsecured revolving credit facility is August 2021. We have the option to extend the initial term for up to two additional 6-month periods, subject to certain conditions, including the payment of an extension fee equal to 0.0625% and 0.075% of the then outstanding commitments under the unsecured revolving credit facility on the first and the second extensions, respectively. The term loan facility matures in March 2025. We may prepay the loans under the Credit Facility at any time in whole or in part, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar Rate borrowings.

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On March 19, 2020, we entered into a senior unsecured term loan facility (the “Term Loan Facility”) with Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Securities, LLC as sole bookrunner, Wells Fargo Securities, LLC, Capital One, National Association, U.S. Bank National Association and SunTrust Robinson Humphrey, Inc. as Joint Lead Arrangers, Capital One, National Association, as syndication agent, U.S. Bank National Association and Truist Bank, as documentation agents, and the lenders party thereto.

The Term Loan Facility is in the original principal amount of $175 million which we borrowed in full at closing. We may request the 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 September 30, 2020, our borrowings amounted to $175.0 million under the Term Loan Facility.

The Term Loan Facility matures on December 31, 2026. We may prepay loans under the Term Loan Facility at any time in whole or in part, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar rate borrowings and, if the prepayment occurs on or before December 31, 2021, a prepayment fee. If the prepayment occurs on or prior to December 31, 2020, the prepayment fee is equal to 2.0% of the principal amount prepaid, and if the prepayment occurs after December 31, 2020 but on or prior to December 31, 2021, the prepayment fee is equal to 1.0% of the principal amount prepaid.

The terms of both the Credit Facility and the 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. It also requires 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 agreement also contains 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, 2020, we were in compliance with the covenants under the Credit Facility and the Term Loan Facility.

Senior Unsecured Notes

On March 17, 2020, through the Operating Partnership, we entered into an agreement to issue and sell an aggregate $175 million of senior unsecured notes, consisting of (a) $100 million aggregate principal amount of 3.61% Series G Senior Notes due March 17, 2032 (the “Series G Notes”) and (b) $75 million aggregate principal amount of 3.73% Series H Senior Notes due March 17, 2035 (the “Series H Notes”). The issue price for the Series G and H Notes was 100% of the aggregate principal amount thereof.

The terms of the Series G and H Notes agreement include customary covenants, including limitations on liens, investment, distributions, debt, fundamental changes, and transactions with affiliates and require certain customary financial reports. It also requires 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 agreement also contains 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 September 30, 2020, we were in compliance with the covenants under the outstanding senior unsecured notes.

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5. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020		December 31, 2019
Accrued capital expenditures	$	63,984	$	90,910
Accounts payable and accrued expenses	34,114		35,084
Interest rate swap agreements liability	10,222		13,330
Accrued interest payable	2,792		3,699
Due to affiliated companies	806		763
Total accounts payable and accrued expenses	$	111,918	$	143,786

6. Financial Instruments and Fair Values

Derivative Financial Instruments

We use derivative financial instruments primarily to manage interest rate risk and such derivatives are not considered speculative. These derivative instruments are typically in the form of interest rate swap and forward agreements and the primary objective is to minimize interest rate risks associated with investing and financing activities. The counterparties of these arrangements are major financial institutions with which we may also have other financial relationships. We are exposed to credit risk in the event of non-performance by these counterparties; however, we currently do not anticipate that any of the counterparties will fail to meet their obligations.

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 September 30, 2020, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $10.3 million. If we had breached any of these provisions at September 30, 2020, we could have been required to settle our obligations under the agreements at their termination value of $10.3 million.

As of September 30, 2020 and December 31, 2019, we had interest rate LIBOR swaps with an aggregate notional value of $265.0 million and $390.0 million, respectively. The notional value does not represent exposure to credit, interest rate or market risks. As of September 30, 2020 and December 31, 2019, the fair value of our derivative instruments amounted to $(10.2) million and $(13.3) million, respectively, which is included in accounts payable and accrued expenses 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.

As of September 30, 2020 and 2019, our cash flow hedges are deemed highly effective and a net unrealized gain (loss) of $2.9 million and $(5.9) million for the three months ended September 30, 2020 and 2019, respectively, and a net unrealized gain (loss) of $(13.4) million and $(25.4) million for the nine months ended September 30, 2020 and 2019, 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 income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the debt. We estimate that $(11.5) million net loss 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 September 30, 2020 and December 31, 2019 (dollar amounts in thousands):     

							September 30, 2020					December 31, 2019
Derivative	Notional Amount		Receive Rate	Pay Rate	Effective Date	Expiration Date	Asset		Liability			Asset		Liability
Interest rate swap	$	265,000	1 Month LIBOR	2.1485%	August 31, 2017	August 24, 2022	$	—	$	(10,222	)	$	—	$	(4,247	)
Interest rate swap	125,000		3 Month LIBOR	2.9580%	July 1, 2019	N/A	—		—			—		(9,083		)
							$	—	$	(10,222	)	$	—	$	(13,330	)

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During the nine months ended September 30, 2020, we terminated the $125.0 million swap and paid a settlement fee of $20.3 million.

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, 2020 and 2019 (amounts in thousands):    

	Three Months Ended						Nine Months Ended
Effects of Cash Flow Hedges	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Amount of gain (loss) recognized in other comprehensive income (loss)	$	64		$	(6,256	)	$	(19,340	)	$	(25,992	)
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense	(2,873		)	(319		)	(5,986		)	(637		)

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, 2020 and 2019 (amounts in thousands):

	Three Months Ended						Nine Months Ended
Effects of Cash Flow Hedges	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Total interest (expense) presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded	$	(23,360	)	$	(19,426	)	$	(66,906	)	$	(60,712	)
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense	(2,873		)	(319		)	(5,986		)	(637		)

Fair Valuation

The estimated fair values at September 30, 2020 and December 31, 2019 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. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The fair value of derivative instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. Although the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counterparties. The impact of such credit valuation adjustments, determined based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of our derivatives were classified as Level 2 of the fair value hierarchy.

The fair value of our mortgage notes payable, senior unsecured notes - Series A, B, C, D, E, F, G and H, unsecured term loan facilities, unsecured revolving credit facility and ground lease liabilities 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 to us.

The following tables summarize the carrying and estimated fair values of our financial instruments as of September 30, 2020 and December 31, 2019 (amounts in thousands):

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	September 30, 2020
			Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3
Interest rate swaps included in accounts payable and accrued expenses	$	10,222	$	10,222	$	—	$	10,222	$	—
Mortgage notes payable	603,178		636,032		—		—		636,032
Senior unsecured notes - Series A, B, C, D, E, F, G and H	973,106		1,055,971		—		—		1,055,971
Unsecured term loan facilities	387,309		390,000		—		—		390,000

    

	December 31, 2019
			Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3
Interest rate swaps included in accounts payable and accrued expenses	$	13,330	$	13,330	$	—	$	13,330	$	—
Mortgage notes payable	605,542		629,609		—		—		629,609
Senior unsecured notes - Series A, B, C, D, E and F	798,392		843,394		—		—		843,394
Unsecured term loan facility	264,640		265,000		—		—		265,000

Disclosure about the fair value of financial instruments is based on pertinent information available to us as of September 30, 2020 and December 31, 2019. 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.

7. Leases

Lessor    

We lease various spaces to tenants over terms ranging from one to 21 years. Certain leases have renewal options for additional terms. 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 September 30, 2020 and 2019 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 nine months ended September 30, 2020 and 2019 are as follows (amounts in thousands):

	Three Months Ended				Nine Months Ended
Rental revenue	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Fixed payments	$	122,976	$	129,030	$	375,882	$	380,647
Variable payments	16,933		21,195		50,139		54,066
Total rental revenue	$	139,909	$	150,225	$	426,021	$	434,713

As of September 30, 2020, 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 2038 (amounts in thousands):

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Remainder of 2020	$	126,997
2021	502,160
2022	484,131
2023	459,992
2024	423,039
Thereafter	2,139,096
	$	4,135,415

The above future minimum lease payments exclude tenant recoveries, amortization of deferred rent receivables and the net accretion of above-below-market lease intangibles. Some leases are subject to termination options generally upon payment of a termination fee. The preceding table is prepared assuming such options are not exercised.

Lessee

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 $29.2 million and lease liabilities of $29.2 million in our consolidated balance sheet as of September 30, 2020. 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. Right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Variable lease payments are excluded from the right-of-use assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

We make payments under ground leases related to three of our properties. The ground leases are due to expire between the years 2050 and 2077, inclusive of extension options, and have no variable payments or residual value guarantees. As our leases do not provide an implicit rate, we determined our incremental borrowing rate based on information available at the date of adoption of ASU No. 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 September 30, 2020 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 September 30, 2020 was 49.6 years.

As of September 30, 2020, 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 2020	$	380
2021	1,518
2022	1,518
2023	1,518
2024	1,518
Thereafter	66,780
Total undiscounted cash flows	73,232
Present value discount	(44,078		)
Ground lease liabilities	$	29,154

8. Commitments and Contingencies

Legal Proceedings

Except as described below, as of September 30, 2020, 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.

As previously disclosed, in October 2014, 12 former investors (the "Claimants") in Empire State Building Associates L.L.C. (“ESBA”), which prior to the initial public offering of our company (the "Offering"), owned the fee title to the Empire

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State Building, filed an arbitration with the American Arbitration Association against Peter L. Malkin, Anthony E. Malkin, Thomas N. Keltner, Jr., and our subsidiary ESRT MH Holdings LLC, the former supervisor of ESBA (the "Respondents"). The statement of claim (also filed later in federal court in New York for the expressed purpose of tolling the statute of limitations) alleges breach of fiduciary duty and related claims in connection with the Offering and formation transactions and seeks monetary damages and declaratory relief. Claimants had opted out of a prior class action bringing similar claims that was settled with court approval. Respondents filed an answer and counterclaims. In March 2015, the federal court action was stayed on consent of all parties pending the arbitration. Arbitration hearings started in May 2016 and concluded in August 2018. On August 26, 2020, the arbitration panel issued an award that denied all Claimants’ claims with one exception, on which it awarded Claimants approximately $1.2 million, inclusive of seven years of interest through October 2, 2020.

Respondents believe that such award in favor of the Claimants is entirely without merit, and are in active discussion about their next steps.

     Pursuant to indemnification agreements which were made with our directors, executive officers and chairman emeritus as part of our formation transactions, Anthony E. Malkin, Peter L. Malkin and Thomas N. Keltner, Jr. have defense and indemnity rights from us with respect to this arbitration.

Unfunded Capital Expenditures

At September 30, 2020, we estimate that we will incur approximately $130.1 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. Future property acquisitions may require substantial capital investments for refurbishment and leasing costs. We expect that these financing requirements will be met in a similar fashion.

Concentration of Credit Risk

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 September 30, 2020, we held on deposit at various major financial institutions cash and cash equivalents and restricted cash balances in excess of amounts insured by the Federal Deposit Insurance Corporation.

Asset Retirement Obligations

We are required to accrue costs that we are legally obligated to incur on retirement of our properties which result from acquisition, construction, development and/or normal operation of such properties. Retirement includes sale, abandonment or disposal of a property. Under that standard, a conditional asset retirement obligation represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within a company’s control and a liability for a conditional asset retirement obligation must be recorded if the fair value of the obligation can be reasonably estimated. Environmental site assessments and investigations have identified asbestos or asbestos-containing building materials in certain of our properties. As of September 30, 2020, 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. However, ongoing asbestos abatement, maintenance programs and other required documentation are carried out as required and related costs are expensed as incurred.

Other Environmental Matters

Certain of our properties have been inspected for soil contamination due to pollutants, which may have occurred prior to our ownership of these properties or subsequently in connection with its development and/or its use. Required remediation to such properties has been completed, and as of September 30, 2020, 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. We expect that resolution of the environmental matters relating to the above will not have a material impact on our business, assets, consolidated financial condition, results of operations or liquidity. However, we cannot be certain that we have identified all environmental liabilities at our properties, that all necessary remediation actions have been or will be undertaken at our properties or that we will be indemnified, in full or at all, in the event that such environmental liabilities arise.

Insurance Coverage

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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.

9. Equity

Shares and Units

An operating partnership unit of the Operating Partnership ("OP Unit") and a share of our common stock have essentially the same economic characteristics as they receive the same per unit profit distributions of the Operating Partnership. On the one-year anniversary of issuance, an OP Unit may be tendered for redemption for cash; however, we have sole and absolute discretion, and sufficient authorized common stock, to exchange OP Units for shares of common stock on a one-for-one basis instead of cash.

On May 16, 2019, the Empire State Realty Trust, Inc. Empire State Realty OP, L.P. 2019 Equity Incentive Plan (“2019 Plan”) was approved by our shareholders.  The 2019 Plan provides for grants to directors, employees and consultants of our company and 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 our common stock are authorized for issuance under awards granted pursuant to the 2019 Plan. We will not issue any new equity awards under the First Amended and Restated Empire State Realty Trust, Inc. and Empire State Realty OP, L.P. 2013 Equity Incentive Plan ("2013 Plan", and collectively with the 2019 Plan, "the Plans"). The shares of Class A common stock underlying any awards under the 2019 Plan and the 2013 Plan that are forfeited, canceled or otherwise terminated, other than by exercise, will be added back to the shares of Class A common stock available for issuance under the 2019 Plan. Shares tendered or held back upon exercise of a stock option or settlement of an award under the 2019 Plan or the 2013 Plan to cover the exercise price or tax withholding and shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right upon exercise thereof, will not be added back to the shares of Class A common stock available for issuance under the 2019 Plan. In addition, shares of Class A common stock repurchased on the open market will not be added back to the shares of Class A common stock available for issuance under the 2019 Plan.

Long-term incentive plan ("LTIP") units are a special class of partnership interests in the Operating Partnership. Each LTIP unit awarded will be deemed equivalent to an award of one share of stock under the Plans, reducing the availability for other equity awards on a one-for-one basis.

The vesting period for LTIP units, if any, will be determined at the time of issuance. Under the terms of the LTIP units, the Operating Partnership will revalue for tax purposes its assets upon the occurrence of certain specified events, and any increase in valuation from the time of grant until such event will be allocated first to the holders of LTIP units to equalize the capital accounts of such holders with the capital accounts of OP unitholders. Subject to any agreed upon exceptions, once vested and having achieved parity with OP unitholders, LTIP units are convertible into OP Units in the Operating Partnership on a one-for-one basis.

LTIP units subject to time-based vesting, whether vested or not, receive the same per unit distributions as OP units, which equal per share dividends (both regular and special) on our common stock. Performance based LTIP units receive 10% of such distributions currently, unless and until such LTIP units are earned based on performance, at which time they will receive the accrued and unpaid 90% and will commence receiving 100% of such distributions thereafter.

The following is net income attributable to common stockholders and the issuance of our Class A shares in exchange for the conversion of OP Units into common stock (amounts in thousands):

	Three Months Ended					Nine Months Ended
	September 30, 2020			September 30, 2019		September 30, 2020			September 30, 2019
Net income (loss) attributable to common stockholders	$	(8,204	)	$	15,882	$	(16,502	)	$	32,646
Increase in additional paid-in capital for the conversion of OP Units into common stock	2,419			12,908		24,153			21,773
Change from net income (loss) attributable to common stockholders and transfers from non-controlling interests	$	(5,785	)	$	28,790	$	7,651		$	54,419

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As of September 30, 2020, there were 288,375,949 OP Units outstanding, of which 172,992,089, or 60.0%, were owned by us and 115,383,860, or 40.0%, were owned by other partners, including certain directors, officers and other members of executive management.

Stock and Publicly Traded Operating Partnership Unit Repurchase Program

Our Board of Directors reauthorized the repurchase of up to $500 million of our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units through December 31, 2020. Under the program, we may purchase our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units in accordance with applicable securities laws from time to time in the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to stock price, availability, trading volume and general market conditions. The authorization does not obligate us to acquire any particular amount of securities, and the program may be suspended or discontinued at our discretion without prior notice.

The following table summarizes our purchases of equity securities each of the three months ended September 30, 2020 and the month of October 2020:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Approximate Dollar Value Available for Future Purchase (in thousands)
July 2020	656,318	$	6.72	656,318	$	380,982
August 2020	—	$	—	—	$	380,982
September 2020	477,620	$	6.14	477,620	$	378,050
October 2020	1,952,013	$	6.21	1,952,013	$	365,934

Private Perpetual Preferred Units

As of September 30, 2020, 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"). 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. The Series 2019 Preferred Units are not redeemable at the option of the holders and are redeemable at our option only in the case of specific defined events. The Series 2014 Preferred Units which have a liquidation preference of $16.62 per unit and are entitled to receive cumulative preferential annual cash distributions of $0.60 per unit payable in arrears on a quarterly basis. The Series 2014 Preferred Units are not redeemable at the option of the holders and are redeemable at our option only in the case of specific defined events.

Dividends and Distributions

Total dividends paid to common stockholders were $0.0 million and $37.2 million for the three and nine months ended September 30, 2020, respectively, and $18.9 million and $56.1 million for the three and nine months ended September 30, 2019, respectively. Total distributions paid to OP unitholders, excluding inter-company distributions, were $0.0 million and $25.0 million for the three and nine months ended September 30, 2020 respectively, and $13.0 million and $39.6 million for the three and nine months ended September 30, 2019, respectively. Total distributions paid to preferred unitholders were $1.1 million and $3.1 million for the three and nine months ended September 30, 2020, respectively, and $0.2 million and $0.7 million for the three and nine months ended September 30, 2019, 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 our common stock is authorized for issuance under awards granted pursuant to the 2019 Plan, and as of September 30, 2020, 8.5 million shares of common stock remain available for future issuance.

In March 2020, we made grants of LTIP units to executive officers under the 2019 Plan. At such time, we granted to executive officers a total of 745,155 LTIP units that are subject to time-based vesting and 3,358,767 LTIP units that are subject to market-based vesting, with fair market values of $5.6 million for the time-based vesting awards and $14.0 million for the

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market-based vesting awards. In March 2020, we made grants of LTIP units and restricted stock to certain other employees under the 2019 Plan. At such time, we granted to certain other employees a total of 113,971 LTIP units and 158,806 shares of restricted stock that are subject to time-based vesting and 502,475 LTIP units that are subject to market-based vesting, with fair market values of $2.3 million for the time-based vesting awards and $2.3 million for the market-based vesting awards. The awards subject to time-based vesting vest ratably over four years from January 1, 2020, subject generally to the grantee's continued employment. The first installment vests on January 1, 2021 and the remainder will vest thereafter in three equal annual installments. The vesting of the LTIP units subject to market-based vesting is based on the achievement of relative total stockholder return hurdles over a three-year performance period, commencing on January 1, 2020. Following the completion of the three-year performance period, our compensation committee will determine the number of LTIP units to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the award grant. These units then vest in two installments, with the first installment vesting on January 1, 2023 and the second installment vesting on January 1, 2024, subject generally to the grantee's continued employment on those dates.

Our named executive officers can elect to receive their annual incentive bonus in any combination of (i) cash or vested LTIP's at the face amount of such bonus or (ii) time-vesting LTIP's which would vest over three years, subject to continued employment, at 125% of such face amount. In March 2020, we made grants of LTIP units to executive officers under the 2019 Plan in connection with the 2019 bonus election program. We granted to executive officers a total of 624,380 LTIP units that are subject to time-based vesting with a fair market value of $4.4 million. Of these LTIP units, 23,049 LTIP units vested immediately on the grant date and 601,331 LTIP units vest ratably over three years from January 1, 2020, subject generally to the grantee's continued employment. The first installment vests on January 1, 2021 and the remainder will vest thereafter in two equal annual installments.

In May 2020, we made grants of LTIP units under the 2019 Plan. At such time, we granted our non-employee directors a total of 171,153 LTIP units that are subject to time-based vesting with fair market values of $1.1 million. These awards vest ratably over three years from the date of the grant, subject generally to the director's continued service on our Board of Directors. We also granted Christina Chiu, our Executive Vice President and Chief Financial Officer, a total of 82,199 LTIP units that are subject to time-based vesting and 116,927 LTIP units that are subject to market-based vesting, with fair market values of $0.5 million for the time-based vesting awards and $0.5 million for the market-based vesting awards. We also granted certain other employees a total of 63,229 LTIP units that are subject to time-based vesting with a fair market value of $0.4 million. The awards subject to time-based vesting vest ratably over three or four years from the date of grant, subject generally to the grantee's continued employment. The first installment vests on the respective grant dates in May 2021 and the remainder will vest thereafter in two or three equal annual installments. The vesting of the LTIP units subject to market-based vesting is based on the achievement of relative total stockholder return hurdles over a three-year performance period, commencing on May 7, 2020. Following the completion of the three-year performance period, our compensation committee will determine the number of LTIP units to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the award grant. These units then vest in two installments, with the first installment vesting on May 7, 2023 and the second installment vesting on May 7, 2024, subject generally to the grantee's continued employment on those dates.

In August 2020, we granted R. Paige Hood, our new non-employee director, a total of 25,242 LTIP units that are subject to time-based vesting with a fair market value of $0.2 million. These awards vest ratably over three years from the date of the grant, subject generally to his continued service on our Board of Directors.

In COVID-19 disrupted markets during the first quarter of 2020, the LTIP units that are subject to market-based vesting were undervalued on initial appraisal, and the resulting number of LTIP units issued in March 2020 was reduced on final appraisal to match the original Board-approved dollar value. In June 2020, we reduced the grants of LTIP units that are subject to market-based vesting which were awarded to executive officers and certain other employees by 666,933 LTIP units with fair market values of $2.8 million and 99,630 LTIP units with fair market values of $0.5 million, respectively.

In March 2019, we made grants of LTIP units to executive officers under the 2013 Plan. At such time, we granted to executive officers a total of 461,693 LTIP units that are subject to time-based vesting and 1,806,520 LTIP units that are subject to market-based vesting, with fair market values of $6.4 million for the time-based vesting awards and $12.8 million for the market-based vesting awards. In March 2019, we made grants of LTIP units and restricted stock to certain other employees under the 2013 Plan. At such time, we granted to certain other employees a total of 61,432 LTIP units and 69,358 shares of restricted stock that are subject to time-based vesting and 113,383 LTIP units that are subject to market-based vesting, with fair market values of $2.0 million for the time-based vesting awards and $0.9 million for the market-based vesting awards. The awards subject to time-based vesting vest ratably over four years from January 1, 2019, subject generally to the grantee's continued employment. The first installment vests on January 1, 2020 and the remainder will vest thereafter in three equal

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annual installments. The vesting of the LTIP units subject to market-based vesting is based on the achievement of relative total stockholder return hurdles over a three-year performance period, commencing on January 1, 2019. Following the completion of the three-year performance period, our compensation committee will determine the number of LTIP units to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the award grant. These units then vest in two installments, with the first installment vesting on January 1, 2022 and the second installment vesting on January 1, 2023, subject generally to the grantee's continued employment on those dates.

Our named executive officers can elect to receive their annual incentive bonus in any combination of (i) cash or vested LTIP's at the face amount of such bonus or (ii) time-vesting LTIP's which would vest over three years, subject to continued employment, at 125% of such face amount. In March 2019, we made grants of LTIP units to executive officers under the 2013 Plan in connection with the 2018 bonus election program. We granted to executive officers a total of 334,952 LTIP units that are subject to time-based vesting with a fair market value of $4.6 million. Of these LTIP units, 26,056 LTIP units vested immediately on the grant date and 308,896 LTIP units vest ratably over three years from January 1, 2019, subject generally to the grantee's continued employment. The first installment vests on January 1, 2020 and the remainder will vest thereafter in two equal annual installments.

In October 2019 and May 2019, we made grants of LTIP units to our non-employee directors under the 2019 Plan. In the aggregate, we granted a total of 76,718 LTIP units that are subject to time-based vesting with fair market values of $1.1 million. The awards vest ratably over three years from May 17, 2019, subject generally to the director's continued service on our Board of Directors. The first installment vests on May 17, 2020 and the remainder will vest thereafter in two equal annual installments.

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 or four years, or (ii) the period from the date of grant to the date the employee becomes retirement eligible, which may occur upon grant. An employee is retirement eligible when the employee attains the (i) age of 60 and (ii) the date on which the employee has first completed ten years of continuous service with us or our affiliates. During the second quarter of 2020, the Board approved changing the definition of retirement age from 60 to 65 starting with the grant awards issued in March 2020 under the 2019 Plan. Share-based compensation for market-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 three or four years depending on retirement eligibility.

For the market-based LTIP units, the fair value of the awards was estimated using a Monte Carlo Simulation model and discounted for the restriction period during which the LTIP units cannot be redeemed or transferred and the uncertainty regarding if, and when, the book capital account of the LTIP units will equal that of the common units.  Our stock price, along with the prices of the comparative indexes, is assumed to follow the Geometric Brownian Motion Process.  Geometric Brownian Motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case the stock price) to vary randomly from its current value and take any value greater than zero.  The volatilities of the returns on our stock price and the comparative indexes were estimated based on implied volatilities and historical volatilities using a six-year look-back period.  The expected growth rate of the stock prices over the performance period is determined with consideration of the risk-free rate as of the grant date.  For LTIP unit awards that are time-based, the fair value of the awards was estimated based on the fair value of our stock at the grant date discounted for the restriction period during which the LTIP units cannot be redeemed or transferred and the uncertainty regarding if, and when, the book capital account of the LTIP units will equal that of the common units.  For restricted stock awards that are time-based, we estimate the stock compensation expense based on the fair value of the stock at the grant date.

LTIP units and restricted stock issued during the nine months ended September 30, 2020 were valued at $28.1 million. The weighted average per unit or share fair value was $5.43 for grants issued in 2020. The per unit or share granted in 2020 was estimated on the respective dates of grant using the following assumptions: an expected life from 2.0 to 5.5 years, a dividend rate of 3.70%, a risk-free interest rate from 0.16% to 0.50%, and an expected price volatility from 19.0% to 26.0%.

No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding in 2020.

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The following is a summary of restricted stock and LTIP unit activity for the nine months ended September 30, 2020:

	Restricted Stock		LTIP Units		Weighted Average Grant Fair Value
Unvested balance at December 31, 2019	118,918		5,986,569		$	9.73
Vested	(57,599	)	(1,052,692	)	14.04
Granted	161,449		5,011,693		5.43
Forfeited or unearned	(1,136	)	(2,201,453	)	7.57
Unvested balance at September 30, 2020	221,632		7,744,117		$	6.93

The LTIP unit and 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 performance-based awards, and accordingly, we recognized $0.4 million and $2.3 million for the three and nine months ended September 30, 2020, respectively, and $0.3 million and $1.8 million for the three and nine months ended September 30, 2019, respectively. Unrecognized compensation expense was $1.7 million at September 30, 2020, which will be recognized over a weighted average period of 2.3 years.

For the remainder of the LTIP unit and restricted stock awards, we recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized noncash compensation expense of $5.1 million and $17.9 million for the three and nine months ended September 30, 2020, respectively, and $3.4 million and $13.6 million for the three and nine months ended September 30, 2019, respectively. Unrecognized compensation expense was $31.4 million at September 30, 2020, which will be recognized over a weighted average period of 2.3 years.

Earnings Per Share

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Earnings per share for the three and nine months ended September 30, 2020 and 2019 is computed as follows (amounts in thousands, except per share amounts):

	Three Months Ended						Nine Months Ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Numerator - Basic:
Net income (loss)	$	(12,269	)	$	26,784		$	(23,599	)	$	55,570
Private perpetual preferred unit distributions	(1,050		)	(234		)	(3,147		)	(702		)
Net income (loss) attributable to non-controlling interests	5,115			(10,668		)	10,244			(22,222		)
Earnings allocated to unvested shares	(24		)	(13		)	(60		)	(33		)
Net income (loss) attributable to common stockholders - basic	$	(8,228	)	$	15,869		$	(16,562	)	$	32,613
Numerator - Diluted:
Net income (loss)	$	(12,269	)	$	26,784		$	(23,599	)	$	55,570
Private perpetual preferred unit distributions	(1,050		)	(234		)	(3,147		)	(702		)
Earnings allocated to unvested shares	(24		)	(13		)	(60		)	(33		)
Net income (loss) attributable to common stockholders - diluted	$	(13,343	)	$	26,537		$	(26,806	)	$	54,835
Denominator:
Weighted average shares outstanding - basic	173,048			178,352			176,299			177,428
Operating partnership units	107,892			119,799			109,341			120,689
Effect of dilutive securities:
Stock-based compensation plans	—			—			—			—
Weighted average shares outstanding - diluted	280,940			298,151			285,640			298,117
Earnings per share:
Basic	$	(0.05	)	$	0.09		$	(0.09	)	$	0.18
Diluted	$	(0.05	)	$	0.09		$	(0.09	)	$	0.18

There were zero and 169,848 antidilutive shares and LTIP units for the three and nine months ended September 30, 2020, respectively, and 452,457 and 288,053 antidilutive shares and LTIP units for the three and nine months ended September 30, 2019, respectively.

10. Related Party Transactions

Supervisory Fee Revenue

We earned supervisory fees from entities affiliated with Anthony E. Malkin, our Chairman and Chief Executive Officer, of $0.2 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively, and $0.7 million and $0.7 million for the nine months ended September 30, 2020 and 2019, 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 $0.1 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2020 and 2019, respectively. These fees are included within third-party management and other fees.

Other

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We receive rent generally at market rental rate for 5,447 square feet of leased space from entities affiliated with Anthony E. Malkin at one of our properties. Under the lease, the tenant has the right to cancel such lease without special payment on 90 days’ notice. We also have a shared use agreement with such tenant, to occupy a portion of the leased premises as the office location for Peter L. Malkin, our chairman emeritus and employee, utilizing approximately 15% of the space, for which we pay to such tenant an allocable pro rata share of the cost. We also have agreements with these entities and excluded properties and businesses to provide them with general computer-related support services. Total revenue aggregated $0.1 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2020 and 2019, respectively.

11. Segment Reporting

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, redevelopment, repositioning and disposition of our traditional real estate assets. Our observatory segment includes the operation of 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 marketing strategies. We account for intersegment sales and rent as if the sales or rent were to third parties, that is, at current market prices.

The following tables provide components of segment profit for each segment for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):

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	Three Months Ended September 30, 2020
	Real Estate			Observatory			Intersegment Elimination		Total
Revenues:
Rental revenue	$	139,909		$	—		$	—	$	139,909
Intercompany rental revenue	(2,233		)	—			2,233		—
Observatory revenue	—			4,419			—		4,419
Lease termination fees	331			—			—		331
Third-party management and other fees	283			—			—		283
Other revenue and fees	1,633			—			—		1,633
Total revenues	139,923			4,419			2,233		146,575
Operating expenses:
Property operating expenses	33,836			—			—		33,836
Intercompany rent expense	—			(2,233		)	2,233		—
Ground rent expense	2,331			—			—		2,331
General and administrative expenses	14,517			—			—		14,517
Observatory expenses	—			5,931			—		5,931
Real estate taxes	31,196			—			—		31,196
Impairment charge	2,103			—			—		2,103
Depreciation and amortization	44,679			54			—		44,733
Total operating expenses	128,662			3,752			2,233		134,647
Total operating income (loss)	11,261			667			—		11,928
Other income (expense):
Interest income	360			6			—		366
Interest expense	(23,360		)	—			—		(23,360		)
Loss on early extinguishment of debt	—			—			—		—
IPO litigation expense	(1,165		)	—			—		(1,165		)
Income (loss) before income taxes	(12,904		)	673			—		(12,231		)
Income tax (expense) benefit	(196		)	158			—		(38		)
Net income (loss)	$	(13,100	)	$	831		$	—	$	(12,269	)
Segment assets	$	3,771,476		$	239,238		$	—	$	4,010,714
Expenditures for segment assets	$	30,831		$	516		$	—	$	31,347

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	Three Months Ended September 30, 2019
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	150,225		$	—		$	—		$	150,225
Intercompany rental revenue	23,242			—			(23,242		)	—
Observatory revenue	—			37,575			—			37,575
Lease termination fees	2,361			—			—			2,361
Third-party management and other fees	304			—			—			304
Other revenue and fees	2,408			—			—			2,408
Total revenues	178,540			37,575			(23,242		)	192,873
Operating expenses:
Property operating expenses	47,894			—			—			47,894
Intercompany rent expense	—			23,242			(23,242		)	—
Ground rent expense	2,331			—			—			2,331
General and administrative expenses	14,421			—			—			14,421
Observatory expenses	—			9,089			—			9,089
Real estate taxes	29,599			—			—			29,599
Depreciation and amortization	44,253			7			—			44,260
Total operating expenses	138,498			32,338			(23,242		)	147,594
Total operating income	40,042			5,237			—			45,279
Other income (expense):
Interest income	2,269			—			—			2,269
Interest expense	(19,426		)	—			—			(19,426		)
Income before income taxes	22,885			5,237			—			28,122
Income tax expense	(267		)	(1,071		)	—			(1,338		)
Net income	$	22,618		$	4,166		$	—		$	26,784
Segment assets	$	3,659,592		$	265,725		$	—		$	3,925,317
Expenditures for segment assets	$	42,901		$	18,375		$	—		$	61,276

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	Nine Months Ended September 30, 2020
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	426,021		$	—		$	—		$	426,021
Intercompany rental revenue	13,356			—			(13,356		)	—
Observatory revenue	—			24,049			—			24,049
Lease termination fees	1,575			—			—			1,575
Third-party management and other fees	930			—			—			930
Other revenue and fees	5,254			—			—			5,254
Total revenues	447,136			24,049			(13,356		)	457,829
Operating expenses:
Property operating expenses	105,054			—			—			105,054
Intercompany rent expense	—			13,356			(13,356		)	—
Ground rent expense	6,994			—			—			6,994
General and administrative expenses	48,617			—			—			48,617
Observatory expenses	—			18,087			—			18,087
Real estate taxes	90,029			—			—			90,029
Impairment charges	6,204			—			—			6,204
Depreciation and amortization	143,522			87			—			143,609
Total operating expenses	400,420			31,530			(13,356		)	418,594
Total operating income (loss)	46,716			(7,481		)	—			39,235
Other income (expense):
Interest income	2,438			91			—			2,529
Interest expense	(66,906		)	—			—			(66,906		)
Loss on early extinguishment of debt	(86		)	—			—			(86		)
IPO litigation expense	(1,165		)	—			—			(1,165		)
Loss before income taxes	(19,003		)	(7,390		)	—			(26,393		)
Income tax (expense) benefit	(692		)	3,486			—			2,794
Net loss	$	(19,695	)	$	(3,904	)	$	—		$	(23,599	)
Expenditures for segment assets	$	77,503		$	2,748		$	—		$	80,251

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	Nine Months Ended September 30, 2019
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	434,713		$	—		$	—		$	434,713
Intercompany rental revenue	58,754			—			(58,754		)	—
Observatory revenue	—			91,039			—			91,039
Lease termination fees	3,112			—			—			3,112
Third-party management and other fees	955			—			—			955
Other revenue and fees	6,591			—			—			6,591
Total revenues	504,125			91,039			(58,754		)	536,410
Operating expenses:
Property operating expenses	131,076			—			—			131,076
Intercompany rent expense	—			58,754			(58,754		)	—
Ground rent expense	6,994			—			—			6,994
General and administrative expenses	44,445			—			—			44,445
Observatory expenses	—			25,024			—			25,024
Real estate taxes	86,098			—			—			86,098
Depreciation and amortization	135,157			22			—			135,179
Total operating expenses	403,770			83,800			(58,754		)	428,816
Total operating income	100,355			7,239			—			107,594
Other income (expense):
Interest income	9,907			—			—			9,907
Interest expense	(60,712		)	—			—			(60,712		)
Income before income taxes	49,550			7,239			—			56,789
Income tax expense	(762		)	(457		)	—			(1,219		)
Net income	$	48,788		$	6,782		$	—		$	55,570
Expenditures for segment assets	$	134,865		$	46,703		$	—		$	181,568

During the second quarter 2020, we wrote-off $4.1 million of prior expenditures on a potential energy efficiency project in our real estate segment that is not economically feasible in today's regulatory environment. During the third quarter 2020, we also wrote off $2.1 million of prior expenditures on a build-to-suit development project in our real estate segment that was halted due to reconsideration by the user driven by the COVID-19 pandemic. For the nine months ended September 30, 2020, the total $6.2 million write-off is shown as Impairment charge in the condensed consolidated statements of operations.

12. Subsequent Events

None.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise requires or indicates, references in this section to “we,” “our,” and “us” refer to our company and its consolidated subsidiaries. The following discussion related to our consolidated financial statements should be read in conjunction with the financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2019.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “contemplates,” “aims,” “continues,” “would” or “anticipates” or the negative of these words and phrases or similar words or phrases. In particular, statements pertaining to our capital resources, portfolio performance, dividend policy and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our portfolio from operations, acquisitions and anticipated market conditions, demographics and results of operations are forward-looking statements.

Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control, and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise, and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all).

The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: (i) economic, political and social impact of, and uncertainty relating to, the COVID-19 pandemic, including (a) the effectiveness or lack of effectiveness of governmental relief in providing assistance to businesses that have suffered significant declines in revenues as a result of mandatory business shut-downs, “shelter-in-place” or “stay-at-home” orders and social distancing practices, as well as individuals adversely impacted by the COVID-19 pandemic, (b) the duration of any such orders or other formal recommendations for social distancing and the speed and extent to which revenues of the Company’s tenants, particularly retail, and the Observatory recover following the lifting of any such orders or recommendations, (c) the potential impact of any such events on the obligations of the Company’s tenants to make rent and other payments or honor other commitments, including such tenants’ ability to pay rent following the termination of temporary governmental assistance and benefits programs, (d) the potential impact on the Company’s human capital management, including potential reductions in productivity associated with work-from-home and risks associated with employees returning to the office, (e) international and national disruption of travel and tourism with a resulting decline in Observatory visitors, and (f) macroeconomic conditions, such as a disruption of, or lack of access to, the capital markets, and general volatility adversely impacting the market price of the Company’s Class A common stock and publicly-traded partnership units of the Operating Partnership; (ii) resolution of legal proceedings involving the Company; (iii) reduced demand for office or retail space, including as a result of the COVID-19 pandemic; (iv) changes in our business strategy; (v) changes in technology and market competition that affect utilization of our office, retail, broadcast or other facilities; (vi) changes in domestic or international tourism, including due to health crises such as the COVID-19 pandemic, geopolitical events and/or currency exchange rates, which may cause a decline in Observatory visitors; (vii) defaults on, early terminations of, or non-renewal of, leases by tenants; (viii) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors, including the potential phasing out of LIBOR after 2021; (ix) declining real estate valuations and impairment charges; (x) termination or expiration of our ground leases; (xi) changes in our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due and potential limitations on our ability to borrow additional funds in compliance with drawdown conditions and financial covenants; (xii) decreased rental rates or increased vacancy rates; (xiii) our failure to redevelop and reposition properties, or to execute any newly planned capital project successfully or on the anticipated timeline or at the anticipated costs; (xiv) difficulties in identifying properties to acquire and completing acquisitions; (xv) risks related to our development projects (including our Metro Tower development site) and capital projects, including the cost of construction delays and cost overruns; (xvi) impact of changes in governmental regulations, tax laws and rates and similar matters; (xvii) our failure to qualify as a REIT; and (xviii) environmental uncertainties and risks related to adverse weather conditions, rising sea levels and natural disasters. For a further discussion of these and other factors that could impact the Company's future results, performance or transactions, see the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q, in the Company’s Annual Report on Form 10-K for the year ended

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December 31, 2019, and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission.

While forward-looking statements reflect the Company's good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to update or revise publicly any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes after the date of this Quarterly Report on Form 10-Q, except as required by applicable law. Prospective investors should not place undue reliance on any forward-looking statements, which are based only on information currently available to the Company.

Overview

We are a self-administered and self-managed real estate investment trust ("REIT") that owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area.

Highlights for the three months ended September 30, 2020 included:

• Incurred net loss attributable to the Company of $8.2 million and achieved Core Funds From Operations of $34.9 million.

• Same-Store Property Cash NOI excluding lease termination fees was up 9.3% from the third quarter of 2019 primarily driven by lower property operating expenses and free rent burn-off, partially offset by lower revenue.

• Strong liquidity position of $1.5 billion as of September 30, 2020, comprised of $373.0 million of cash plus an additional $1.1 billion available under our revolving credit facility. Moreover, we have no debt maturity until 2024.

• In the third quarter and through October 30, 2020, we repurchased $19.5 million of our common stock at a weighted average price of $6.31 per share, which brings the year-to-date total to $134.1 million at a weighted average price of $8.30 per share.

• For the total portfolio in the third quarter, we signed 18 new, renewal, and expansion leases, representing 247,449 rentable square feet.

• Collected 94% of third quarter 2020 total billings with 96% for office tenants and 84% for retail tenants. Through October 31, 2020, collected 93% of October total billings, with 94% for office tenants and 86% for retail tenants.

• Year-to-date through September 30th, we reduced property operating expenses by $26 million compared to the prior year, driven by reduced tenant utilization and our cost reduction initiatives.

• On July 13, 2020, we announced the appointment of R. Paige Hood to our Board of Directors, effective August 1, 2020, and the departure of William H. Berkman, effective July 31, 2020.

As of September 30, 2020, our total portfolio contained 10.1 million rentable square feet of office and retail space. We owned 14 office properties (including three long-term ground leasehold interests) encompassing approximately 9.4 million rentable square feet of office space. Nine of these properties are located in the midtown Manhattan market and aggregate approximately 7.6 million rentable square feet of office space, including the Empire State Building. Our Manhattan office properties also contain an aggregate of approximately 0.5 million rentable square feet of premier retail space on their ground floor and/or contiguous levels. Our remaining five office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing in the aggregate approximately 1.8 million rentable square feet. The majority of square footage for these five properties is 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 September 30, 2020, our portfolio included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing approximately 0.2 million rentable square feet in the aggregate.

The Empire State Building is our flagship property. The Empire State Building provides us with a diverse source of revenue through its office and retail leases, observatory operations and broadcasting licenses and related leased space. Our observatory operations are a separate reporting segment. Our observatory operations are subject to regular patterns of tourist activity in Manhattan and currently impacted by the COVID-19 pandemic. Historically, 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

33.0% was realized in the third quarter, and 23.0% to 25.0% was realized in the fourth quarter. On March 16, 2020, we complied with governmental mandates regarding the closing of non-essential businesses in response to the COVID-19 pandemic and closed the Empire State Building Observatory. The Observatory reopened on July 20, 2020.

The components of the Empire State Building revenue are as follows (dollars in thousands):

	Nine Months Ended September 30,
	2020				2019
Office leases	$	106,774	63.9	%	$	106,848	45.1	%
Retail leases	5,177		3.1	%	5,566		2.4	%
Tenant reimbursements & other income	16,358		9.8	%	21,356		9.0	%
Observatory operations	24,049		14.4	%	91,039		38.5	%
Broadcasting licenses and leases	14,793		8.8	%	11,945		5.0	%
Total	$	167,151	100.0	%	$	236,754	100.0	%

We have been undertaking a comprehensive redevelopment and repositioning strategy of our Manhattan office properties. This strategy is designed to improve the overall value and attractiveness of our properties and has contributed significantly to our tenant repositioning efforts, which seek to increase our occupancy, raise our rental rates, increase our rentable square feet, increase our aggregate rental revenue, lengthen our average lease term, increase our average lease size, and improve our tenant credit quality. These improvements include restored, renovated and upgraded or new lobbies, elevator modernization, renovated public areas and bathrooms, refurbished or new windows, upgrade and standardization of retail storefront and signage, façade restorations, modernization of building-wide systems, and enhanced tenant amenities. We

have also aggregated smaller spaces in order to offer larger blocks of office space, including multiple floors, that are attractive to larger, higher credit-quality tenants as well as to offer new, pre-built suites with improved layouts. This strategy has shown what we believe to be attractive results to date, and we believe has the potential to improve our operating margins and cash flows in the future. From 2002 through September 30, 2020, we have invested a total of approximately $942.1 million (excluding tenant improvement costs and leasing commissions) in our Manhattan office properties pursuant to this program. We intend to fund these capital improvements through a combination of operating cash flow, cash on hand, and borrowings.

The Greater New York Metropolitan Area office market is soft, and we compete with properties that have been redeveloped recently or have planned redevelopment.  We expect to spend approximately $40 million over 2018 through 2020 on these well-maintained and our well-located properties’ common areas and amenities to ensure competitiveness and protect our market position. Expenditures, which began during the second quarter 2018, were $35.0 million through September 30, 2020.

As of September 30, 2020, excluding principal amortization, we had no debt maturing until 2024.  As of September 30, 2020, we had total debt outstanding of approximately $2.0 billion, with a weighted average interest rate of 4.0%, and a weighted average maturity of 8.3 years. 93.7% of our total debt outstanding is fixed-rate indebtedness and 6.3% is variable-rate indebtedness. As of September 30, 2020, we had cash and cash equivalents of approximately $373.1 million. Our consolidated net debt to total market capitalization was approximately 46.3% as of September 30, 2020.

Impact of COVID-19

In March 2020, the outbreak of the novel Coronavirus Disease 2019 ("COVID-19") was recognized as a pandemic by the World Health Organization. The spread of COVID-19 has created a global public health crisis that has resulted in unprecedented economic, social and political uncertainty, volatility and disruption in the United States and globally. We have taken the following actions in response to the impact of the COVID-19 pandemic on our business.

Liquidity

In March 2020, we bolstered our balance sheet to ensure proper liquidity by raising $300.0 million in net proceeds in two financings and drawing down $550.0 million under our $1.1 billion unsecured revolving credit facility. In September 2020, we repaid the $550.0 million draw on our revolving credit facility. We currently hold $373.1 million in cash on our balance sheet and have $1.1 billion undrawn capacity under our revolving credit facility.

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Property Operations

All of our office buildings have remained open during the COVID-19 pandemic to tenants that provide essential goods and services, as permitted by the authorities. We have scaled back certain building operations in cleaning, security, lobby concierge and recurring maintenance, which will reduce costs until buildings are repopulated. A portion of the reduction in operating expenses will be offset by a reduction in tenant expense recoveries.

Our operations team worked diligently to develop plans for tenants reoccupation of our buildings to ensure a safe, clean and healthy work environment. These plans involve additional staffing, cleaning and maintenance, and changes to building operations for access by tenants and their guests.

All New York State capital improvement work, except for essential work as defined by the authorities which includes safety-related work and work to demobilize previously started projects, was stopped in March 2020 until June 8, 2020, when government restrictions were lifted. The spend was significantly curtailed under the restrictions.

Despite the challenge of the uncertain near-term environment, we continue to believe in the long-term demand for office space. Many have now experienced the inefficiencies of working from home and miss the connectivity and productivity that an office environment provides. That said, we believe the pandemic may cause some fundamental changes to how tenants use their office space in the future including less densification and smarter open floor plans with appropriate spacing. We also believe current co-working build-outs are too dense and will be poorly positioned for tenant demand in the new paradigm.

Leasing    

The economic uncertainty relating to the COVID-19 pandemic has slowed the pace of our leasing activity and could result in higher vacancy than we otherwise would have experienced, a longer amount of time to fill vacancies and potentially lower rental rates. As of September 30, 2020, our portfolio was 89.7% leased, including SLNC, including 2.6% subject to leases scheduled to expire in 2020 and 6.2% subject to leases scheduled to expire in 2021.

New leasing activity was impacted during the third quarter by the pandemic and shelter-in-place rules that were in effect for much of the period. During this time period, we instituted a number of online measures to maintain our relationships with brokers and expose our availabilities to the market. While physical tours resumed on June 22, 2020 and coincided with Phase 2 reopening, we expect lower leasing volumes for the third and fourth quarters based on current tenant activity.

Rent Collections

As of October 31, 2020, we have experienced steady improvement in the collection of our property billings. The following table reflects the percentages of rent collected from total billings.

Collections as of October 30, 2020	Second Quarter 2020		Third Quarter 2020		October 2020
Total billings collected	85	%	94	%	93	%
Rent deferrals	4	%	—	%	—	%
Security deposits collected	8	%	1	%	—	%
Uncollected - covered by security deposit	1	%	2	%	3	%
Uncollected	2	%	3	%	4	%
Total	100	%	100	%	100	%

Our smaller food and service type retailers have been hit particularly hard. They provide critical amenities and services to our office tenants. Our plan is to convert some of their fixed rent to a percentage rent structure, with a payback of the difference between current and percentage rent over a defined period. We intend to support our food and service retailers so that they can service our office tenants when they re-occupy.

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Observatory Operations

On March 16, 2020, we complied with governmental mandates regarding the closing of non-essential businesses in response to the COVID-19 pandemic and closed the Empire State Building Observatory. While closed, we reduced our annualized operating expense run-rate from $35 million in February 2020 to approximately $14 million in May 2020, a 60% reduction. Approximately two-thirds of the reduction was attributable to lower payroll expenses as we furloughed staff and the balance is due to lower operational and other costs.

The Observatory reopened under New York State's Phase 4 guidelines, Low-Risk Outdoor Arts and Entertainment, on July 20, 2020. The 102nd observation deck was reopened on August 24, 2020. We anticipate that initially we will have a higher local visitor mix, followed by a ramp up of nationally sourced travel, which will then be followed by a restoration of our typical visitor mix that is approximately two-thirds international which we do not expect to be achieved until the broad resumption of international air travel some time in 2022.

With the Observatory reopened, for the balance of 2020, we will operate with reduced hours, staffing, services, operating costs, credit card fees and marketing expenses. We project we can operate at this level until we reach 60% of 2019 attendance, after which expenses will ramp up.

The closure of our Observatory caused us during the quarter to choose to perform an impairment test related to goodwill. We engaged a third-party valuation consulting firm to perform the valuation process. Based upon the results of the goodwill impairment test of the stand-alone Observatory reporting unit, which is after the intercompany rent expense paid to the Real Estate reporting unit, we determined that the fair value of the Observatory reporting unit exceeded its carrying value by less than 5.0%.  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 and that continued assessment may again utilize a third-party valuation consulting firm. Goodwill allocated to the Observatory reporting unit was $227.5 million at September 30, 2020.

Expense Reductions

    We have undertaken meaningful cost reduction measures to ensure our ongoing strength and position the business optimally through the current environment broken down as follows:

• Named Executive Officer compensation:

▪ ($0.4) million from reduction in annual base salary for Anthony E. Malkin, our Chairman, President and Chief Executive Officer, and Thomas P. Durels, our Executive Vice President, Real Estate, through December 31, 2020;

▪ ($1.2) million from the change in age requirement from 60 to 65 for the accounting vesting period for time-based equity compensation; and

▪ ($2.7) million from the departure of our former Chief Operating Officer.

• Other corporate overhead:

▪ ($1.5) million of net changes from the addition of investment personnel and reductions in executive and corporate staff, and temporary corporate salary reductions through December 31, 2020; and

▪ Balance from department budget cuts and lower anticipated spending due to the COVID-19 pandemic.

• In addition, we announced a $3.9 million reduction in 2021 NEO annual equity compensation, comprised of a $2.7 million reduction for Mr. Malkin and $1.2 million reduction for Mr. Durels.

• Property operating expenses

▪ Year-to-date through September 30th, we reduced property operating expenses by $26 million compared to the prior year period, driven by reduced tenant utilization and our cost reduction initiatives.

▪ $4 million on an annualized basis of permanent cost reductions due to staffing and other reductions.

• Capital expenditures

▪ $24 million in lower planned 2020 capital expenditures for building improvements compared to 2019 due to focus only on mandatory spending and work previously commenced.

Results of Operations

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Overview

The discussion below relates to our financial condition and results of operations for the three and nine months ended September 30, 2020 and 2019, respectively.

Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019

The following table summarizes our historical results of operations for the three months ended September 30, 2020 and 2019 (dollars in thousands):

	Three Months Ended September 30,
	2020			2019			Change			%
Revenues:
Rental revenue	$	139,909		$	150,225		$	(10,316	)	(6.9	)%
Observatory revenue	4,419			37,575			(33,156		)	(88.2	)%
Lease termination fees	331			2,361			(2,030		)	(86.0	)%
Third-party management and other fees	283			304			(21		)	(6.9	)%
Other revenues and fees	1,633			2,408			(775		)	(32.2	)%
Total revenues	146,575			192,873			(46,298		)	(24.0	)%
Operating expenses:
Property operating expenses	33,836			47,894			14,058			29.4	%
Ground rent expenses	2,331			2,331			—			—	%
General and administrative expenses	14,517			14,421			(96		)	(0.7	)%
Observatory expenses	5,931			9,089			3,158			34.7	%
Real estate taxes	31,196			29,599			(1,597		)	(5.4	)%
Impairment charge	2,103			—			(2,103		)	(100.0	)%
Depreciation and amortization	44,733			44,260			(473		)	(1.1	)%
Total operating expenses	134,647			147,594			12,947			8.8	%
Operating income (loss)	11,928			45,279			(33,351		)	(73.7	)%
Other income (expense):
Interest income	366			2,269			(1,903		)	(83.9	)%
Interest expense	(23,360		)	(19,426		)	(3,934		)	(20.3	)%
IPO litigation expense	(1,165		)	—			(1,165		)	(100.0	)%
Income (loss) before income taxes	(12,231		)	28,122			(40,353		)	(143.5	)%
Income tax benefit (expense)	(38		)	(1,338		)	1,300			97.2	%
Net income (loss)	(12,269		)	26,784			(39,053		)	(145.8	)%
Private perpetual preferred unit distributions	(1,050		)	(234		)	(816		)	(348.7	)%
Net (income) loss attributable to non-controlling interests	5,115			(10,668		)	15,783			147.9	%
Net income (loss) attributable to common stockholders	$	(8,204	)	$	15,882		$	(24,086	)	(151.7	)%

Rental Revenue

The decrease in rental revenue was attributable to the write-off of straight-line receivables and uncollectible tenant receivables and lower tenant expense reimbursements, consistent with lower expenses.

Observatory Revenue

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Observatory revenues were lower driven by the closure of the Observatory on March 16, 2020 due to the COVID-19 pandemic. The Observatory reopened on July 20, 2020 but New York tourism continues to be impacted by international, national, and local travel restrictions and quarantines. Observatory revenue included $2.0 million of deferred revenue from unused tickets and earned income from tour and travel partners, as well as $1.2 million of fixed license fee for the gift shop.

Lease Termination Fees

Lower termination fees were earned in the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

Third-Party Management and Other Fees

Management fee income was consistent with prior year.

Other Revenues and Fees

The decrease in other revenues and fees was due to lower food and beverage sales and lower parking income due to the COVID-19 pandemic, partially offset by a $0.8 million development project reimbursement.

Property Operating Expenses

The decrease in property operating expenses was primarily due to lower repair and maintenance costs, lower payroll costs, lower utility costs and lower professional fees. The lower costs are primarily due to lower tenant utilization in our buildings.

Ground Rent Expenses

Ground rent expense was consistent with 2019.

General and Administrative Expenses

The increase in general and administrative expenses was primarily due to equity compensation expense, partially offset by lower legal leasing costs.

Observatory Expenses

Lower Observatory expenses were driven by the closure and then limited operations of the Observatory during the three months ended September 30, 2020.

Real Estate Taxes

The increase in real estate taxes was primarily due to higher assessed values for multiple properties.

Impairment charge

Reflects a $2.1 million write-off of prior expenditures on a development project that is unlikely to continue. There was an $0.8 million development project reimbursement reflected in Other Revenues and Fees.

Depreciation and Amortization

The increase in depreciation and amortization was consistent with 2019.

Interest Income

The decrease in interest income was primarily due to lower interest rates.

Interest Expense

Interest expense increased due to new financings entered into in March 2020 and a draw on our unsecured revolving credit facility. The draw on our credit facility was fully repaid on September 1, 2020.

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IPO Litigation Expense

Represents an accrued expense which reflects an estimated liability associated with the Initial Public Offering-related litigation.

Income Taxes

The increase in income tax benefit was attributable to higher net loss for the Observatory segment.

Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019

The following table summarizes our historical results of operations for the nine months ended September 30, 2020 and 2019 (dollars in thousands):

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	Nine Months Ended September 30,
	2020			2019			Change			%
Revenues:
Rental revenue	$	426,021		$	434,713		$	(8,692	)	(2.0	)%
Observatory revenue	24,049			91,039			(66,990		)	(73.6	)%
Lease termination fees	1,575			3,112			(1,537		)	(49.4	)%
Third-party management and other fees	930			955			(25		)	(2.6	)%
Other revenues and fees	5,254			6,591			(1,337		)	(20.3	)%
Total revenues	457,829			536,410			(78,581		)	(14.6	)%
Operating expenses:
Property operating expenses	105,054			131,076			26,022			19.9	%
Ground rent expenses	6,994			6,994			—			—	%
General and administrative expenses	48,617			44,445			(4,172		)	(9.4	)%
Observatory expenses	18,087			25,024			6,937			27.7	%
Real estate taxes	90,029			86,098			(3,931		)	(4.6	)%
Impairment charges	6,204			—			(6,204		)	(100.0	)%
Depreciation and amortization	143,609			135,179			(8,430		)	(6.2	)%
Total operating expenses	418,594			428,816			10,222			2.4	%
Operating income (loss)	39,235			107,594			(68,359		)	(63.5	)%
Other income (expense):
Interest income	2,529			9,907			(7,378		)	(74.5	)%
Interest expense	(66,906		)	(60,712		)	(6,194		)	(10.2	)%
Loss on early extinguishment of debt	(86		)	—			(86		)	(100.0	)%
IPO litigation expense	(1,165		)	—			(1,165		)	(100.0	)%
Income (loss) before income taxes	(26,393		)	56,789			(83,182		)	(146.5	)%
Income tax benefit	2,794			(1,219		)	4,013			329.2	%
Net income (loss)	(23,599		)	55,570			(79,169		)	(142.5	)%
Private perpetual preferred unit distributions	(3,147		)	(702		)	(2,445		)	(348.3	)%
Net (income) loss attributable to non-controlling interests	10,244			(22,222		)	32,466			146.1	%
Net income (loss) attributable to common stockholders	$	(16,502	)	$	32,646		$	(49,148	)	(150.5	)%

Rental Revenue

The decrease in rental revenue was attributable to the write-off of straight-line receivables and uncollectible tenant receivables and lower tenant expense reimbursements, consistent with lower expenses.

Observatory Revenue

Observatory revenues were lower driven by the closure of the Observatory on March 16, 2020 due to the COVID-19 pandemic. The Observatory reopened on July 20, 2020 but New York tourism continues to be impacted by international, national, and local travel restrictions and quarantines. Observatory revenues increased during the first two months of 2020 by 13.2%, after adjusting for the 102nd floor observation deck, to $14.4 million from $12.7 million in the first two months of 2019.

Lease Termination Fees

Lower termination fees were earned in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Third-Party Management and Other Fees

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Management fee income was consistent with prior year.

Other Revenues and Fees

The decrease in other revenues and fees was due to lower food and beverage sales and lower parking income due to the COVID-19 pandemic.

Property Operating Expenses

The decrease in property operating expenses was primarily due to lower repair and maintenance costs, lower payroll costs, lower repair, lower utility costs and lower professional fees.

Ground Rent Expenses

Ground rent expense was consistent with 2019.

General and Administrative Expenses

The increase in general and administrative expenses was primarily due to severance costs and equity compensation expense, partially offset by lower legal leasing costs.

Observatory Expenses

Lower Observatory expenses were driven by the closure of the Observatory due to the COVID-19 pandemic.

Real Estate Taxes

The increase in real estate taxes was primarily due to higher assessed values for multiple properties.

Impairment charges

Reflects a $4.1 million write-off of prior expenditures on a potential energy efficiency project that is not economically feasible in today's regulatory environment and a $2.1 million write-off of prior expenditures on a development project that is unlikely to continue.

Depreciation and Amortization

The increase in depreciation and amortization reflects tenant improvement write-offs due to the early termination of a tenant.

Interest Income

The decrease in interest income was primarily due to lower interest rates in the current year and higher short-term investments in the prior year.

Interest Expense

Interest expense increased due to new financings entered into in March 2020 and a draw on our unsecured revolving credit facility. The draw on our credit facility was fully repaid on September 1, 2020.

Loss on Early Extinguishment of Debt

Loss on early extinguishment of debt was incurred in connection with the refinancing of the term loan in the first quarter 2020.

IPO Litigation Expense

Represents an accrued expense which reflects an estimated liability associated with the Initial Public Offering-related litigation.

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Income Taxes

The increase in income tax benefit was attributable to higher net loss for the Observatory segment.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, including lease-up costs, fund our redevelopment and repositioning programs, acquire properties, make distributions to our securityholders and fulfill other general business needs. Based on the historical experience of our management and our business strategy, in the foreseeable future we anticipate we will generate positive cash flows from operations. In order to qualify as a REIT, we are required under the Internal Revenue Code of 1986 to distribute to our stockholders, on an annual basis, at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains. We expect to make quarterly distributions to our securityholders.

While we may be able to anticipate and plan for certain liquidity needs, there may be unexpected increases in uses of cash that are beyond our control and which would affect our financial condition and results of operations. For example, we may be required to comply with new laws or regulations that cause us to incur unanticipated capital expenditures for our properties, thereby increasing our liquidity needs. Even if there are no material changes to our anticipated liquidity requirements, our sources of liquidity may be fewer than, and the funds available from such sources may be less than, anticipated or needed. Our primary sources of liquidity will generally consist of cash on hand and cash generated from our operating activities, debt issuances and unused borrowing capacity under our unsecured revolving credit facility. We expect to meet our short-term liquidity requirements, including distributions, operating expenses, working capital, debt service, and capital expenditures from cash flows from operations, cash on hand, debt issuances, and available borrowing capacity under our unsecured revolving credit facility. The availability of these borrowings is subject to the conditions set forth in the applicable loan agreements. We expect to meet our long-term capital requirements, including acquisitions, redevelopments and capital expenditures through our cash flows from operations, cash on hand, our unsecured revolving credit facility, mortgage financings, debt issuances, common and/or preferred equity issuances and asset sales. Our properties require periodic investments of capital for individual lease related tenant improvements allowances, general capital improvements and costs associated with capital expenditures. Our overall leverage will depend on our mix of investments and the cost of leverage. Our charter does not restrict the amount of leverage that we may use.

At September 30, 2020, we had approximately $373.1 million available in cash and cash equivalents, and $1.1 billion available under our unsecured revolving credit facility.

Through August 2021, Q REIT Holding LLC, a Qatar Financial Centre limited liability company and a wholly owned

subsidiary of the Qatar Investment Authority, a governmental authority of the State of Qatar (“QREIT”, together with any eligible transferee, “QIA”) will have a right of first offer to co-invest with us as a joint venture partner in real estate investment opportunities initiated by us where we have elected, at our discretion, to seek out a joint venture partner in real estate investment opportunities. The right of first offer period will be extended for 30 months so long as at least one joint venture transaction is consummated by us and QIA during the initial term, and will be extended for a further 30-month term if at least one more joint venture transaction is consummated during such initial extension period.

As of September 30, 2020, we had approximately $2.0 billion of total consolidated indebtedness outstanding, with a weighted average interest rate of 4.0% and a weighted average maturity of 8.3 years. As of September 30, 2020, excluding principal amortization, we had no debt maturing until 2024. Our consolidated net debt to total market capitalization was 46.3% as of September 30, 2020.

Unsecured Revolving Credit and Term Loan Facilities

During March 2020, through the Operating Partnership, we entered into an amendment to an existing credit agreement with the lenders party thereto, Bank of America, N.A., as administrative agent, and Bank of America, Wells Fargo Bank, National Association and Capital One, National Association, as the letter of credit issuers party thereto. The amendment amends the amended and restated senior unsecured revolving credit and term loan facility, entered into in August 2017, with Bank of America, N.A., as administrative agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC as Joint Lead Arrangers and Joint Bookrunners, Wells Fargo, National Association and Capital One, National Association, as co-syndication agents, and the lenders party thereto.

This new amended unsecured revolving credit and term loan facility is comprised of a $1.1 billion revolving credit facility and a $215 million term loan facility. We borrowed the term loan facility in full at closing. We also borrowed

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$550.0 million on the revolving credit facility in March 2020 which we repaid in September 2020. The amended unsecured revolving credit and term loan facility contains an accordion feature that would allow us to increase the maximum aggregate principal amount to $1.75 billion under specified circumstances. Certain of our Operating Partnership's subsidiaries are guarantors of our obligations under the amended unsecured revolving credit and term loan facility.

Amounts outstanding under the term loan facility bear interest at a floating rate equal to, at our election, (x) the Eurodollar rate, plus a spread that will range from 1.20% to 1.75% depending upon our leverage ratio, or (y) a base rate, plus a spread that will range from 0.20% to 0.75% depending upon our leverage ratio. If we achieve investment-grade ratings, subject to the terms of the amended unsecured revolving credit and term loan facility, we may elect for amounts outstanding to bear interest at a floating rate equal to, at our election, (x) the Eurodollar rate, plus a spread that will range from 0.85% to 1.65% depending upon our credit rating, or (y) a base rate, plus a spread that will range from 0.0% to 0.65% depending upon our credit rating. Amounts under the revolving credit facility bear interest at a floating rate equal to, at our election, (x) the Eurodollar rate, plus a spread that will range from 1.10% to 1.50% depending upon our leverage ratio or (y) a base rate, plus a spread that will range from 0.10% to 0.50% depending upon our leverage ratio. If we achieve investment-grade ratings, subject to the terms of the amended unsecured revolving credit and term loan facility, we may elect for the amounts outstanding to bear interest at a floating rate equal to, at our election, (x) the Eurodollar rate, plus a spread that will range from 0.825% to 1.55% depending upon our credit rating, or (y) a base rate, plus a spread that will range from 0.0% to 0.55% depending upon our credit rating.

We paid certain customary fees and expense reimbursements in connection with the amended unsecured revolving credit and term loan facility, including a facility fee on commitments under the revolving credit facility that range from 0.125% to 0.35%, subject to the terms of the amended unsecured revolving credit and term loan facility.

The initial maturity of the unsecured revolving credit facility is August 2021. We have the option to extend the initial term for up to two additional six-month periods, subject to certain conditions, including the payment of an extension fee equal to 0.0625% and 0.075% of the then outstanding commitments under the unsecured revolving credit facility on the first and the second extensions, respectively. The term loan facility matures on March 2025. We may prepay the loans under the amended unsecured revolving credit and term loan facility at any time in whole or in part, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar Rate borrowings.

Also during March 2020, through the Operating Partnership, we entered into a senior unsecured term loan facility (the “Term Loan Facility”) with Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Securities, LLC as sole bookrunner, Wells Fargo Securities, LLC, Capital One, National Association, U.S. Bank National Association and SunTrust Robinson Humphrey, Inc. as Joint Lead Arrangers, Capital One, National Association, as syndication agent, U.S. Bank National Association and Truist Bank, as documentation agents, and the lenders party thereto.

The Term Loan Facility is in the original principal amount of $175 million which we borrowed in full at closing. We may request the 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. Certain of the Operating Partnership's subsidiaries are guarantors of our obligations under the Term Loan Facility.

Amounts outstanding under the Term Loan Facility bear interest at a floating rate equal to, at our election, (x) the LIBOR rate, plus a spread that will range from 1.5% to 2.2% depending upon our leverage ratio, or (y) a base rate, plus a spread that will range from 0.5% to 1.2% depending upon our leverage ratio. If we achieve investment-grade ratings, subject to the terms of the Term Loan Facility, we may elect for amounts outstanding to bear interest at a floating rate equal to, at our election, (x) the LIBOR rate, plus a spread that will range from 1.4% to 2.25% depending upon our credit rating, or (y) a base rate, plus a spread that will range from 0.4% to 1.25% depending upon our credit rating.

The Term Loan Facility matures on December 31, 2026. We may prepay loans under the Term Loan Facility at any time, in whole or in part, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar rate borrowings and, if the prepayment occurs on or before December 31, 2021, a prepayment fee. If the prepayment occurs on or prior to December 31, 2020, the prepayment fee is equal to 2.0% of the principal amount prepaid, and if the prepayment occurs after December 31, 2020 but on or prior to December 31, 2021, the prepayment fee is equal to 1.0% of the principal amount prepaid.

Both the amended revolving credit and term loan facility and the Term Loan Facility (collectively, the "Credit Facilities") include the following financial covenants, subject to customary qualifications and cushions: (i) maximum leverage ratio of total indebtedness to total asset value of the loan parties and their consolidated subsidiaries will not exceed 60%, (ii) consolidated secured indebtedness will not exceed 40% of total asset value, (iii) adjusted EBITDA (as defined in the agreement) to consolidated fixed charges will not be less than 1.50x, (iv) the aggregate net operating income with

43

respect to all unencumbered eligible properties to the portion of interest expense attributable to unsecured indebtedness will not be less than 1.75x, and (v) the ratio of total unsecured indebtedness to unencumbered asset value will not exceed 60%.

The Credit Facilities contain customary covenants, including limitations on liens, investment, distributions, debt, fundamental changes, and transactions with affiliates, and requires certain customary financial reports.

The Credit Facilities 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 defined in the respective Credit Facilities). As of September 30, 2020, we were in compliance with the covenants.

Senior Unsecured Notes

On March 17, 2020, through the Operating Partnership, we entered into an agreement to issue and sell an aggregate $175 million of senior unsecured notes, consisting of (a) $100 million aggregate principal amount of 3.61% Series G Senior Notes due March 17, 2032 (the “Series G Notes”) and (b) $75 million aggregate principal amount of 3.73% Series H Senior Notes due March 17, 2035 (the “Series H Notes”), in a private placement to entities affiliated with Prudential Capital Group, AIG Asset Management and MetLife Investment Management, LLC. The issue price for the Series G Notes and Series H Notes was 100% of the aggregate principal amount thereof.

The senior unsecured notes are senior unsecured obligations and are unconditionally guaranteed by each of our subsidiaries that guarantees indebtedness under the unsecured revolving credit and term loan facility. Interest on the senior unsecured notes is payable quarterly.

The terms of the Series G Notes and Series H Notes agreement include customary covenants, including limitations on liens, investment, distributions, debt, fundamental changes, and transactions with affiliates and require certain customary financial reports. It also requires 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 agreement also contains 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 September 30, 2020, we were in compliance with the covenants under the outstanding senior unsecured notes.

Financial Covenants

As of September 30, 2020, we were in compliance with the following financial covenants:

Financial covenant	Required	September 30, 2020		In Compliance
Maximum total leverage	< 60%	33.2	%	Yes
Maximum secured debt	< 40%	10.2	%	Yes
Minimum fixed charge coverage	> 1.50x	2.8x		Yes
Minimum unencumbered interest coverage	> 1.75x	5.2x		Yes
Maximum unsecured leverage	< 60%	28.2	%	Yes

Leverage Policies

We expect to employ leverage in our capital structure in amounts determined from time to time by our board of directors. Although our board of directors has not adopted a policy that limits the total amount of indebtedness that we may incur, we anticipate that our board of directors will consider a number of factors in evaluating our level of indebtedness from time to time, as well as the amount of such indebtedness that will be either fixed or floating rate. Our charter and bylaws do

44

not limit the amount or percentage of indebtedness that we may incur nor do they restrict the form in which our indebtedness will be taken (including, but not limited to, recourse or non-recourse debt and cross-collateralized debt). Our overall leverage will depend on our mix of investments and the cost of leverage, however, we initially intend to maintain a level of indebtedness consistent with our plan to seek an investment grade credit rating. Our board of directors may from time to time modify our leverage policies in light of the then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general market conditions for debt and equity securities, fluctuations in the market price of our common stock, growth and acquisition opportunities and other factors.

Capital Expenditures

The following tables summarize our leasing commission costs, tenant improvement costs and our capital expenditures for each of the periods presented (dollars in thousands, except per square foot amounts).

Office Properties⁽¹⁾

	Nine Months Ended September 30,
Total New Leases, Expansions, and Renewals	2020		2019
Number of leases signed(2)	64		106
Total square feet	459,033		903,010
Leasing commission costs(3)	$	4,356	$	16,071
Tenant improvement costs(3)	20,486		52,533
Total leasing commissions and tenant improvement costs(3)	$	24,842	$	68,604
Leasing commission costs per square foot(3)	$	9.49	$	17.80
Tenant improvement costs per square foot(3)	44.63		58.18
Total leasing commissions and tenant improvement costs per square foot(3)	$	54.12	$	75.98

Retail Properties⁽⁴⁾

	Nine Months Ended September 30,
Total New Leases, Expansions, and Renewals	2020		2019
Number of leases signed(2)	7		8
Total square feet	50,990		54,779
Leasing commission costs(3)	$	1,997	$	1,856
Tenant improvement costs(3)	7,345		2,214
Total leasing commissions and tenant improvement costs(3)	$	9,342	$	4,070
Leasing commission costs per square foot(3)	$	39.16	$	33.88
Tenant improvement costs per square foot(3)	144.04		40.42
Total leasing commissions and tenant improvement costs per square foot(3)	$	183.20	$	74.30

_______________

(1) Excludes an aggregate of 506,453 and 511,755 rentable square feet of retail space in our Manhattan office properties in 2020 and 2019, respectively. Includes the Empire State Building broadcasting licenses and observatory operations.

(2) Presents a renewed and expansion lease as one lease signed.

(3) Presents all tenant improvement and leasing commission costs as if they were incurred in the period in which the lease was signed, which may be different than the period in which they were actually paid.

(4) Includes an aggregate of 506,453 and 511,755 rentable square feet of retail space in our Manhattan office properties in 2020 and 2019, respectively. Excludes the Empire State Building broadcasting licenses and observatory operations.

	Nine Months Ended September 30,
	2020		2019
Total Portfolio
Capital expenditures (1)	$	35,618	$	99,266

_______________

(1) Excludes tenant improvements and leasing commission costs.

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As of September 30, 2020, we expect to incur additional costs relating to obligations under existing lease agreements of approximately $130.1 million for tenant improvements and leasing commissions. We intend to fund the tenant improvements and leasing commission costs through a combination of operating cash flow, cash on hand, additional property level mortgage financings and borrowings under the unsecured revolving credit facility.

Capital expenditures are considered part of both our short-term and long-term liquidity requirements. We intend to fund capital improvements through a combination of operating cash flow, cash on hand and borrowings under the unsecured revolving credit facility.

Contractual Obligations

Refer to our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of our contractual obligations. There have been no material changes, outside the ordinary course of business, to these contractual obligations during the nine months ended September 30, 2020.

Off-Balance Sheet Arrangements

As of September 30, 2020, we did not have any off-balance sheet arrangements.

Distribution Policy

In order to qualify as a REIT, we must distribute to our securityholders, on an annual basis, at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains. In addition, we will be subject to U.S. federal income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income (including net capital gains) and will be subject to a 4% nondeductible excise tax on the amount, if any, by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws. We intend to distribute our net income to our securityholders in a manner intended to satisfy the REIT 90% distribution requirement and to avoid U.S. federal income tax liability on our income and the 4% nondeductible excise tax.

Before we pay any distribution, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and obligations to make payments of principal and interest, if any. However, under some circumstances, we may be required to use cash reserves, incur debt or liquidate assets at rates or times that we regard as unfavorable or make a taxable distribution of our shares in order to satisfy the REIT 90% distribution requirement and to avoid U.S. federal income tax and the 4% nondeductible excise tax in that year.

During August 2020, we announced the suspension of our third and fourth quarter 2020 dividends to holders of our Class A common stock and Class B common stock and to holders of Empire State Realty OP, L.P.’s Series ES, Series 250 and Series 60 operating partnership units and Series PR operating partnership units. We expect to have no taxable income in 2020, and therefore no requirement to pay any dividend on our common stock in either the third or fourth quarter of 2020. We and our Board believe that payment of a dividend is currently not the highest and best use of our balance sheet.

Distributions to Securityholders

Distributions and dividends amounting to $65.4 million and $96.4 million have been made to securityholders for the nine months ended September 30, 2020 and 2019, respectively.

Stock and Publicly Traded Operating Partnership Unit Repurchase Program

Our Board of Directors reauthorized the repurchase of up to $500 million of our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units through December 31, 2020. Under the program, we may purchase our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units in accordance with applicable securities laws from time to time in the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to stock price, availability, trading volume and general market conditions. The authorization does not obligate us to acquire any particular amount of securities, and the program may be suspended or discontinued at our discretion without prior notice.

The following table summarizes our purchases of equity securities in each of the three months ended September 30, 2020 and the month of October 2020:

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Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Approximate Dollar Value Available for Future Purchase (in thousands)
July 2020	656,318	$	6.72	656,318	$	380,982
August 2020	—	$	—	—	$	380,982
September 2020	477,620	$	6.14	477,620	$	378,050
October 2020	1,952,013	$	6.21	1,952,013	$	365,934

Cash Flows

Comparison of Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

Net cash. Cash and cash equivalents and restricted cash were $428.0 million and $330.3 million, respectively, as of September 30, 2020 and 2019. The increase was primarily due to the issuance of financings, partially offset by the repurchase of common shares during the nine months ended September 30, 2020.

Operating activities. Net cash provided by operating activities decreased by $34.8 million to $163.6 million for the nine months ended September 30, 2020 compared to $198.4 million for the nine months ended September 30, 2019, primarily due to changes in working capital and settlement of derivative contracts.

Investing activities. Net cash provided by investing activities decreased by $323.7 million to $113.4 million used in investing activities for the nine months ended September 30, 2020 compared to $210.3 million net cash provided by investing activities for the nine months ended September 30, 2019, due to proceeds from maturing short-term investments in 2019.

Financing activities. Net cash provided by financing activities increased by $455.4 million to $106.2 million provided by financing activities for the nine months ended September 30, 2020 compared to $349.2 million used in financing activities for the nine months ended September 30, 2019, primarily due to the net proceeds from issuance of debt in the nine months ended September 30, 2020 compared to the payment of debt in the nine months ended September 30, 2019.

Net Operating Income ("NOI")

Our internal financial reports include a discussion of property net operating income. NOI is a non-GAAP financial measure of performance. NOI is used by our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by: (i) the cost of funds of the property owner, (ii) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (iii) acquisition expenses, loss on early extinguishment of debt, impairment charges and loss from derivative instruments, or (iv) general and administrative expenses and other gains and losses that are specific to the property owner. The cost of funds is eliminated from net operating income because it is specific to the particular financing capabilities and constraints of the owner. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our office or retail properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.

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NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income computed in accordance with GAAP and discussions elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations regarding the components of net income that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly titled measures and, accordingly, our NOI may not be comparable to similarly titled measures reported by other companies that do not define the measure exactly as we do.

The following table presents a reconciliation of our net income, the most directly comparable GAAP measure, to NOI for the periods presented (amounts in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(unaudited)						(unaudited)
Net income (loss)	$	(12,269	)	$	26,784		$	(23,599	)	$	55,570
Add:
General and administrative expenses	14,517			14,421			48,617			44,445
Depreciation and amortization	44,733			44,260			143,609			135,179
Interest expense	23,360			19,426			66,992			60,712
Income tax expense (benefit)	38			1,338			(2,794		)	1,219
Impairment charges	1,259			—			5,360			—
IPO litigation expense	1,165			—			1,165			—
Less:
Third-party management and other fees	(283		)	(304		)	(930		)	(955		)
Interest income	(366		)	(2,269		)	(2,529		)	(9,907		)
Net operating income	$	72,154		$	103,656		$	235,891		$	286,263
Other Net Operating Income Data
Straight-line rental revenue	$	395		$	5,174		$	5,878		$	13,781
Net increase in rental revenue from the amortization of above-and below-market lease assets and liabilities	$	679		$	1,682		$	2,953		$	5,781
Amortization of acquired below-market ground leases	$	1,957		$	1,957		$	5,873		$	5,783

Funds from Operations ("FFO")

We present below a discussion of FFO. We compute FFO in accordance with the “White Paper” on FFO published by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment write-downs of investments in depreciable real estate and investments in in-substance real estate investments, gains or losses from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), less distributions to non-controlling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures. FFO is a widely recognized non-GAAP financial measure for REITs that we believe, when considered with financial statements determined in accordance with GAAP, is useful to investors in understanding financial performance and providing a relevant basis for comparison among REITs. In addition, FFO is useful to investors as it captures features particular to real estate performance by recognizing that real estate has generally appreciated over time or maintains residual value to a much greater extent than do other depreciable assets. Investors should review FFO, along with GAAP net income, when trying to understand an equity REIT’s operating performance. We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results of operations, the utility of FFO as a measure of performance is limited. There can be no assurance that FFO presented by us is comparable to similarly titled measures of other REITs. FFO does not represent cash generated from operating activities

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and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. Although FFO is a measure used for comparability in assessing the performance of REITs, as the NAREIT White Paper only provides guidelines for computing FFO, the computation of FFO may vary from one company to another.

Modified Funds From Operations ("Modified FFO")

Modified FFO adds back an adjustment for any above or below-market ground lease amortization to traditionally defined FFO. We consider this a useful supplemental measure in evaluating our operating performance due to the non-cash accounting treatment under GAAP, which stems from the third quarter 2014 acquisition of two option properties as they carry significantly below market ground leases, the amortization of which is material to our overall results. We present Modified FFO because we consider it an important supplemental measure of our operating performance in that it adds back the non-cash amortization of below-market ground leases. There can be no assurance that Modified FFO presented by us is comparable to similarly titled measures of other REITs. Modified FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Modified FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions.

Core Funds From Operations ("Core FFO")

Core FFO adds back to Modified FFO the following items: deferred tax asset write-off, loss on early extinguishment of debt, acquisition expenses, severance expenses and IPO litigation expense. The Company presents Core FFO because it considers it an important supplemental measure of its operating performance in that it excludes non-recurring items. There can be no assurance that Core FFO presented by the Company is comparable to similarly titled measures of other REITs. Core FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Core FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. In future periods, we may also exclude other items from Core FFO that we believe may help investors compare our results.

The following table presents a reconciliation of our net income, the most directly comparable GAAP measure, to FFO, Modified FFO and Core FFO for the periods presented (amounts in thousands):

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(unaudited)						(unaudited)
Net income (loss)	$	(12,269	)	$	26,784		$	(23,599	)	$	55,570
Private perpetual preferred unit distributions	(1,050		)	(234		)	(3,147		)	(702		)
Real estate depreciation and amortization	43,029			43,303			138,555			132,217
Impairment charges	1,259			—			5,360			—
FFO attributable to common stockholders and non-controlled interests	30,969			69,853			117,169			187,085
Amortization of below-market ground leases	1,957			1,957			5,873			5,873
Modified FFO attributable to common stockholders and non-controlled interests	32,926			71,810			123,042			192,958
Loss on early extinguishment of debt	—			—			86			—
Severance expenses	805			—			3,813			—
IPO litigation expense	1,165			—			1,165			—
Core FFO attributable to common stockholders and non-controlled interests	$	34,896		$	71,810		$	128,106		$	192,958
Weighted average shares and Operating Partnership Units
Basic	280,940			298,151			285,640			298,117
Diluted	280,940			298,151			285,640			298,117

Factors That May Influence Future Results of Operations

Impact of COVID-19

See "Overview" section.

Leasing

We signed 1.3 million rentable square feet of new leases, expansions and lease renewals for the year ended December 31, 2019. During the nine months ended September 30, 2020, we signed 0.5 million rentable square feet of new leases, expansions and renewals.

Due to the relatively small number of leases that are signed in any particular quarter, one or more larger leases may have a disproportionately positive or negative impact on average rent, tenant improvement and leasing commission costs for that period. As a result, we believe it is more appropriate when analyzing trends in average rent and tenant improvement and leasing commission costs to review activity over multiple quarters or years. Tenant improvement costs include expenditures for general improvements occurring concurrently with, but that are not directly related to, the cost of installing a new tenant. Leasing commission costs are similarly subject to significant fluctuations depending upon the length of leases being signed and the mix of tenants from quarter to quarter.

As of September 30, 2020, there were approximately 1.0 million rentable square feet of space in our portfolio available to lease (excluding leases signed but not yet commenced) representing 10.3% of the net rentable square footage of the properties in our portfolio. In addition, leases representing 2.6% and 6.2% of net rentable square footage of the properties in our portfolio will expire in 2020 and in 2021, respectively. These leases are expected to represent approximately 2.7% and 6.6%, respectively, of our annualized rent for such periods. Our revenues and results of operations can be impacted by expiring leases that are not renewed or re-leased or that are renewed or re-leased at base rental rates equal to, above or below the current average base rental rates. Further, our revenues and results of operations can also be affected by the costs we incur to re-lease available space, including payment of leasing commissions, redevelopments and build-to-suit remodeling that may not be borne by the tenant.

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Despite the challenge of the uncertain near-term environment, we continue to believe that as we complete the redevelopment and repositioning of our properties we will, over the long-term, experience increased occupancy levels and rents. Over the short term, as we renovate and reposition our properties, including aggregating smaller spaces to offer large blocks of space, we may experience lower occupancy levels as a result of having to relocate tenants to alternative space and the strategic expiration of existing leases. We believe that despite the short-term lower occupancy levels we may experience, we will continue to experience increased rental revenues as a result of the increased rents which we expect to obtain following the redevelopment and repositioning of our properties.

Observatory Operations

On March 16, 2020, we complied with governmental mandates regarding the closing of non-essential businesses in response to the COVID-19 pandemic and closed the Empire State Building Observatory. The Observatory was closed for the entirety of the second quarter 2020 and reopened the 86th floor observation deck on July 20, 2020 with new protocols and processes under New York State's Phase 4's Low-Risk Outdoor Arts and Entertainment guidelines. The 102nd floor observation deck reopened on August 24, 2020.

Observatory revenues for the first two months of 2020 increased by 13.2%, after adjusting the for the 102nd floor observation deck which was closed during the first quarter of 2019.

The Observatory hosted approximately 30,000 visitors in the third quarter of 2020, compared to 1,042,000 visitors in the third quarter of 2019, a decrease of 97.1%. In spite of the ongoing nature of international, national, and local travel restrictions and quarantines, the Observatory has seen steady, weekly increases in visitors. Our return of attendance to pre- COVID-19 levels is closely tied to national and international travel trends and these remain adversely impacted by developments around the COVID-19 pandemic.    

Observatory revenues for the three months ended September 30, 2020 were $4.4 million, driven by low visitation levels and less days of operation in the quarter. Observatory revenue included $2.0 million of deferred revenue from unused tickets and earned income from tour and travel partners, as well as $1.2 million of fixed license fee for the gift shop.

Observatory revenues and admissions are dependent upon the following: (i) the number of tourists (domestic and international) who come to New York City and visit the observatory, as well as any related tourism trends; (ii) the prices per admission that can be charged; (iii) seasonal trends affecting the number of visitors to the observatory; (iv) competition, in particular from other new and existing observatories; and (v) weather trends.

Critical Accounting Estimates

Refer to our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of our critical accounting estimates. There were no material changes to our critical accounting estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. One of the principal market risks facing us is interest rate risk on our variable rate indebtedness. As of September 30, 2020, our floating rate debt of $125.0 million represented 3.3% of our total enterprise value.

Subject to maintaining our qualification as a REIT for U.S. federal income tax purposes, we may mitigate the risk of interest rate volatility through the use of hedging instruments, such as interest rate swap agreements and interest rate cap agreements. Our primary objectives when undertaking hedging transactions and derivative positions will be to reduce our floating rate exposure and to fix a portion of the interest rate for anticipated financing and refinancing transactions. This in turn will reduce the risk that the variability of cash flows will impose on floating rate debt. However, we can provide no assurances that our efforts to manage interest rate volatility will successfully mitigate the risks of such volatility on our portfolio. We are not subject to foreign currency risk.

We are exposed to interest rate changes primarily on our unsecured revolving credit facility and debt refinancings. Our objectives with respect to interest rate risk are to limit the impact of interest rate changes on operations and cash flows, and to lower our overall borrowing costs. To achieve these objectives, we may borrow at fixed rates and may enter into derivative financial instruments such as interest rate swaps or caps in order to mitigate our interest rate risk on a related floating rate financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes.

We entered into an interest rate LIBOR swap agreement with an aggregate notional value of $265.0 million, which fixes the LIBOR interest rate at 2.1485% and matures on August 24, 2022. This interest rate swap as of September 30, 2020 has been designated as a cash flow hedge and is deemed highly effective with a fair value of $(10.2) million which is included in accounts payable and accrued expenses on the condensed consolidated balance sheet.

Based on our variable balances, interest expense would have increased by approximately $1.3 million for the nine months ended September 30, 2020, if short-term interest rates had been 1% higher. As of September 30, 2020, the weighted average interest rate on the $1.8 billion of fixed-rate indebtedness outstanding was 4.02% per annum, with maturities at various dates through March 17, 2035.

As of September 30, 2020, the fair value of our outstanding debt was approximately $2.1 billion, which was approximately $118.4 million more than the historical book value as of such date. Interest risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change.

However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure. In the event that LIBOR is discontinued, the interest rates for our unsecured revolving credit facility and our unsecured term loan facility and the swap rate for our interest rate swap following such event will be based on an alternative variable rate as specified in the applicable documentation governing such debt or swaps or as otherwise agreed upon with our bankers. Such an event would not affect our ability to borrow or maintain already outstanding borrowings or our ability to maintain our outstanding swaps, but the alternative variable rate could be higher and more volatile than LIBOR prior to its discontinuance. We understand that LIBOR is expected to remain available through the end of 2021 but may be discontinued or otherwise become unavailable thereafter.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and regulations and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of September 30, 2020, the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer,

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regarding the effectiveness of our disclosure controls and procedures at the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded, as of that time, that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports filed or submitted under the Exchange Act (i) is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

No changes to our internal control over financial reporting were identified in connection with the evaluation referenced above that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 8 to the Notes to Condensed Consolidated Financial Statements for a description of legal proceedings.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors included in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, except as disclosed below.

The current COVID-19 pandemic has had, and any future public health crisis could have, serious adverse effects on our and our tenants’ businesses, operations, and financial condition, on local, national, and global economic activity, and on volatility and negative pressure in financial markets.

The COVID-19 pandemic has impacted the entire U.S., including the states of New York and Connecticut where we own office and retail property assets and operate the Observatory. Measures taken by local, state and federal authorities to prevent, remediate or limit the impact of COVID-19, including quarantines, restrictions on travel, “stay-at-home” or “shelter-in-place” orders, social distancing practices, restrictions on business operations, construction projects and certain contract and judicial remedies, have had adverse effects on us and our tenants, which are largely continuing. As a result of such restrictions, we had to close the Observatory to the public on March 16, 2020 until its re-opening as an Outdoor Attraction (excluding the 102^nd Floor) on July 20, 2020, and during such closure all Observatory revenue was discontinued. Since then, with continued international and national travel restrictions, visitor volume has lagged our earlier expectations, and we cannot predict when we may achieve Observatory revenues comparable to 2019 when approximately 64% of our visitors were from other countries.

The COVID-19 pandemic and the measures taken to limit its spread have adversely impacted and may continue to adversely impact adversely some or all of our tenants regarding, among other things, their ability or willingness to pay rent in full, or at all, or on a timely basis, and our ability to collect rent from them. A number of our tenants across various industries have announced temporary closures of their leased premises and requested rent deferral or abatement. For the second and third quarters of 2020, we collected a lower percentage of billings than in comparable periods in prior years across both our office and retail portfolios, and we have made rent deferral agreements with certain tenants. We have seen, and may continue to see, circumstances in which tenants request rent deferral, rent abatement or early lease termination and/or default in lease obligations. Additionally, we have seen, and may continue to see, certain tenants challenge the existence of such obligations and/or close temporarily or permanently and/or declare bankruptcy, all of which individually or collectively reduce our revenue and such reduction could be material. While some of our tenants have been able to qualify for COVID-related temporary government assistance, the termination of such assistance programs may increase the severity of the pandemic’s economic damage. Backlogs and obstacles from government moratoriums and/or limits (including temporary closure of certain court systems) which directly or indirectly abridge the enforcement of lease obligations and related guarantees may also affect our ability to collect rent or enforce related remedies. The scope and duration of the foregoing events are uncertain and unpredictable.

In addition, the COVID-19 pandemic, and any future public health crisis, could have a material adverse effect on our human capital management. While we have implemented enhanced health and safety protocols in accordance with New York State guidelines, our employees, including our senior management team, remain subject to risk of illness, which would create new challenges in leadership and execution. Although the majority of our corporate employees have returned to the office,

53

certain employees continue to work remotely, which could strain our team efficiencies, collaboration culture, cybersecurity, employee morale, and management’s ability to supervise our employees and manage our business.

Moreover, real estate companies like us may be subject to claims from employees, tenants, vendors, visitors or the public that they were exposed to COVID-19 by our inadequate protective measures or were unnecessarily inconvenienced or damaged by our excessive protective measures.

The COVID-19 pandemic, and any future public health crisis, could have a material adverse effect on our results of operations, cash flows and financial condition due, among other factors to:

• prolonged reduction in business vitality which could impair our prospects for new and renewal leases, decrease demand for office and retail space, decrease rental rates, and/or increase lease terminations and vacancy rates, all with an adverse impact on the value or market price of our assets;

• temporary or long-term reduction in demand for commercial office space based on new acceptance of employees’ remote work from home;

• new obstacles to our plans to redevelop and reposition properties, or to execute any newly planned capital project, successfully or on the anticipated timeline or at the anticipated costs;

• impairment of our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due, to comply with covenants in existing credit agreements, to borrow additional funds in compliance with drawdown conditions of existing facilities, or to enter into new financings;

• volatility and downward pressure on the market price of our Class A common stock and publicly traded partnership units of the Operating Partnership which would also reduce our access to capital and/or our equity currency for new acquisitions; and

• reduction of our cash flows and our ability to pay dividends.

The rapid developments regarding the COVID-19 pandemic preclude reliable predictions as to its ultimate adverse impact, which largely arises from factors beyond our control. Many risk factors which were described in our 2019 Annual Report, prior to the emergence of the pandemic, should now be considered to have heightened significance as a result of the COVID-19 pandemic.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

None

Recent Purchases of Equity Securities

Stock and Publicly Traded Operating Partnership Unit Repurchase Program

Our Board of Directors reauthorized the repurchase of up to $500 million of our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units through December 31, 2020.     Under the program, we may purchase our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units in accordance with applicable securities laws from time to time in the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to stock price, availability, trading volume and general market conditions. The authorization does not obligate us to acquire any particular amount of securities, and the program may be suspended or discontinued at our discretion without prior notice.

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The following table summarizes our purchases of equity securities in each of the three months ended September 30, 2020 and the month of October 2020:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Approximate Dollar Value Available for Future Purchase (in thousands)
July 2020	656,318	$	6.72	656,318	$	380,982
August 2020	—	$	—	—	$	380,982
September 2020	477,620	$	6.14	477,620	$	378,050
October 2020	1,952,013	$	6.21	1,952,013	$	365,934

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit No.	Description
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Document
101.DEF*	XBRL Taxonomy Extension Definitions Document
101.LAB*	XBRL Taxonomy Extension Labels Document
101.PRE*	XBRL Taxonomy Extension Presentation Document
Notes:
* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EMPIRE STATE REALTY TRUST, INC.

Date: November 5, 2020                            By:/s/ Christina Chiu

Executive Vice President and

Chief Financial Officer

(Principal Financial Officer)

Date: November 5, 2020                         By:/s/ Andrew J. Prentice

Senior Vice President, Chief Accounting

Officer and Treasurer

(Principal Accounting Officer)

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EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Anthony E. Malkin, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Empire State Realty Trust, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 5, 2020 By: /s/ Anthony E. Malkin 
Anthony E. Malkin Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Christina Chiu, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Empire State Realty Trust, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 5, 2020 By: /s/ Christina Chiu 
Christina Chiu Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of Empire State Realty Trust, Inc. (the "Company"), hereby certifies, to his knowledge that the Quarterly Report on Form 10-Q for the period ended September 30, 2020 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 5, 2020 By: /s/ Anthony E. Malkin 
Anthony E. Malkin Chairman and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, the undersigned, Executive Vice President and Chief Financial Officer of Empire State Realty Trust, Inc. (the "Company"), hereby certifies, to her knowledge that the Quarterly Report on Form 10-Q for the period ended September 30, 2020 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 5, 2020 By: /s/ Christina Chiu
Christina Chiu Executive Vice President and Chief Financial Officer

XML

Cover Page - shares	9 Months Ended
	Sep. 30, 2020	Oct. 30, 2020
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	001-36105
Entity Registrant Name	EMPIRE STATE REALTY TRUST, INC.
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	37-1645259
Entity Address, Address Line One	111 West 33rd Street
Entity Address, Address Line Two	12th Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10120
City Area Code	212
Local Phone Number	687-8700
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Central Index Key	0001541401
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Class A Common Stock
Title of 12(b) Security	Class A Common Stock, par value $0.01 per share
Trading Symbol	ESRT
Security Exchange Name	NYSE
Entity Common Stock, Shares Outstanding		170,950,356
Class B Common Stock
Title of 12(b) Security	Class B Common Stock, par value $0.01 per share
Entity Common Stock, Shares Outstanding		1,010,832
No Trading Symbol Flag	true

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Commercial real estate properties, at cost:
Land	$ 201,196	$ 201,196
Development costs	7,938	7,989
Building and improvements	2,925,532	2,900,248
Commercial real estate properties, at cost	3,134,666	3,109,433
Less: accumulated depreciation	(927,517)	(862,534)
Commercial real estate properties, net	2,207,149	2,246,899
Cash and cash equivalents	373,088	233,946
Restricted cash	54,865	37,651
Tenant and other receivables	25,853	25,423
Deferred rent receivables	223,886	220,960
Prepaid expenses and other assets	50,773	65,453
Deferred costs, net	207,774	228,150
Acquired below-market ground leases, net	346,693	352,566
Right of use assets	29,154	29,307
Goodwill	491,479	491,479
Total assets	4,010,714	3,931,834
Liabilities:
Mortgage notes payable, net	603,178	605,542
Senior unsecured notes, net	973,106	798,392
Unsecured term loan facilities, net	387,309	264,640
Unsecured revolving credit facility, net	0	0
Accounts payable and accrued expenses	111,918	143,786
Acquired below-market leases, net	33,405	39,679
Ground lease liabilities	29,154	29,307
Deferred revenue and other liabilities	77,572	72,015
Tenants’ security deposits	51,257	30,560
Total liabilities	2,266,899	1,983,921
Commitments and contingencies
Empire State Realty Trust, Inc. stockholders' equity:
Preferred stock, $0.01 par value per share, 50,000,000 shares authorized, none issued or outstanding	0	0
Additional paid-in capital	1,161,871	1,232,433
Accumulated other comprehensive loss	(30,038)	(21,496)
Retained (deficit) earnings	(64,293)	15,764
Total Empire State Realty Trust, Inc.'s stockholders' equity	1,069,269	1,228,520
Non-controlling interests in operating partnership	644,606	690,242
Total equity	1,743,815	1,947,913
Total liabilities and equity	4,010,714	3,931,834
Class A Common Stock
Empire State Realty Trust, Inc. stockholders' equity:
Common stock	1,719	1,809
Class B Common Stock
Empire State Realty Trust, Inc. stockholders' equity:
Common stock	10	10
Private Perpetual Preferred Units, Series 2019
Empire State Realty Trust, Inc. stockholders' equity:
Private perpetual preferred units, issued, value	21,936	21,147
Private Perpetual Preferred Units, Series 2014
Empire State Realty Trust, Inc. stockholders' equity:
Private perpetual preferred units, issued, value	$ 8,004	$ 8,004

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Equity:
Preferred stock, par value (in USD per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	50,000,000	50,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Class A Common Stock
Common stock, par value (in USD per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	400,000,000	400,000,000
Common stock, shares issued (in shares)	171,981,257	180,877,597
Common stock, shares outstanding (in shares)	171,981,257	180,877,597
Class B Common Stock
Common stock, par value (in USD per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	1,010,832	1,016,799
Common stock, shares outstanding (in shares)	1,010,832	1,016,799
Private Perpetual Preferred Units, Series 2014
Private perpetual preferred units, per unit liquidation preference (in USD per share)	$ 16.62	$ 16.62
Private perpetual preferred units, issued (in shares)	1,560,360	1,560,360
Private perpetual preferred units, outstanding (in shares)	1,560,360	1,560,360
Private Perpetual Preferred Units, Series 2019
Private perpetual preferred units, per unit liquidation preference (in USD per share)	$ 13.52	$ 13.52
Private perpetual preferred units, issued (in shares)	4,664,038	4,610,383
Private perpetual preferred units, outstanding (in shares)	4,664,038	4,610,383

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues:
Rental revenue	$ 139,909	$ 150,225	$ 426,021	$ 434,713
Observatory revenue	4,419	37,575	24,049	91,039
Lease termination fees	331	2,361	1,575	3,112
Third-party management and other fees	283	304	930	955
Other revenue and fees	1,633	2,408	5,254	6,591
Total revenues	146,575	192,873	457,829	536,410
Operating expenses:
Property operating expenses	33,836	47,894	105,054	131,076
Ground rent expenses	2,331	2,331	6,994	6,994
General and administrative expenses	14,517	14,421	48,617	44,445
Observatory expenses	5,931	9,089	18,087	25,024
Real estate taxes	31,196	29,599	90,029	86,098
Impairment charges	2,103	0	6,204	0
Depreciation and amortization	44,733	44,260	143,609	135,179
Total operating expenses	134,647	147,594	418,594	428,816
Total operating income	11,928	45,279	39,235	107,594
Other income (expense):
Interest income	366	2,269	2,529	9,907
Interest expense	(23,360)	(19,426)	(66,906)	(60,712)
Loss on early extinguishment of debt	0	0	(86)	0
IPO litigation expense	(1,165)	0	(1,165)	0
Income (loss) before income taxes	(12,231)	28,122	(26,393)	56,789
Income tax benefit (expense)	(38)	(1,338)	2,794	(1,219)
Net income (loss)	(12,269)	26,784	(23,599)	55,570
Private perpetual preferred unit distributions	(1,050)	(234)	(3,147)	(702)
Net (income) loss attributable to non-controlling interests	5,115	(10,668)	10,244	(22,222)
Net income (loss) attributable to common stockholders	$ (8,204)	$ 15,882	$ (16,502)	$ 32,646
Total weighted average shares:
Basic (in shares)	173,048	178,352	176,299	177,428
Diluted (in shares)	280,940	298,151	285,640	298,117
Earnings per share attributable to common stockholders:
Basic (in USD per share)	$ (0.05)	$ 0.09	$ (0.09)	$ 0.18
Diluted (in USD per share)	(0.05)	0.09	(0.09)	0.18
Dividends per share (in USD per share)	$ 0	$ 0.105	$ 0.210	$ 0.315

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (12,269)	$ 26,784	$ (23,599)	$ 55,570
Other comprehensive income (loss):
Unrealized gain (loss) on valuation of interest rate swap agreements	64	(6,256)	(19,340)	(25,992)
Less: amount reclassified into interest expense	2,873	319	5,986	637
Other comprehensive income (loss)	2,937	(5,937)	(13,354)	(25,355)
Comprehensive income (loss)	(9,332)	20,847	(36,953)	30,215
Net income attributable to non-controlling interests and private perpetual preferred unitholders	4,065	(10,902)	7,097	(22,924)
Other comprehensive (income) loss attributable to non-controlling interests	(1,060)	2,347	5,114	10,269
Comprehensive income (loss) attributable to common stockholders	$ (6,327)	$ 12,292	$ (24,742)	$ 17,560

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Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Class A Common Stock	Class B Common Stock	Common Stock Class A Common Stock	Common Stock Class B Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Retained (Deficit) Earnings	Total Stockholders' Equity	Non-controlling Interests	Private Perpetual Preferred Units
Beginning balance (in shares) at Dec. 31, 2018				173,874,000	1,038,000
Beginning balance at Dec. 31, 2018	$ 1,991,109			$ 1,739	$ 10	$ 1,204,075	$ (8,853)	$ 41,511	$ 1,238,482	$ 744,623	$ 8,004
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Conversion of operating partnership units and Class B shares to Class A shares (in shares)				5,204,000	(19,000)
Conversion of operating partnership units and Class B shares to Class A shares	0			$ 52		21,773	(171)		21,654	(21,654)
Equity compensation:
LTIP units	14,971									14,971
Restricted stock, net of forfeitures (in shares)				53,000
Restricted stock, net of forfeitures	421					421			421
Dividends and distributions	(96,370)							(56,098)	(56,098)	(39,570)	(702)
Net income (loss)	55,570							32,646	32,646	22,222	702
Other comprehensive income (loss)	(25,355)						(15,086)		(15,086)	(10,269)
Ending balance (in shares) at Sep. 30, 2019				179,131,000	1,019,000
Ending balance at Sep. 30, 2019	1,940,346			$ 1,791	$ 10	1,226,269	(24,110)	18,059	1,222,019	710,323	8,004
Beginning balance (in shares) at Jun. 30, 2019				176,991,000	1,030,000
Beginning balance at Jun. 30, 2019	1,948,032			$ 1,770	$ 10	1,213,170	(20,387)	21,084	1,215,647	724,381	8,004
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Conversion of operating partnership units and Class B shares to Class A shares (in shares)				2,141,000	(11,000)
Conversion of operating partnership units and Class B shares to Class A shares	0			$ 21		12,908	(133)		12,796	(12,796)
Equity compensation:
LTIP units	3,456									3,456
Restricted stock, net of forfeitures (in shares)				(1,000)
Restricted stock, net of forfeitures	191					191			191
Dividends and distributions	(32,180)							(18,907)	(18,907)	(13,039)	(234)
Net income (loss)	26,784							15,882	15,882	10,668	234
Other comprehensive income (loss)	(5,937)						(3,590)		(3,590)	(2,347)
Ending balance (in shares) at Sep. 30, 2019				179,131,000	1,019,000
Ending balance at Sep. 30, 2019	1,940,346			$ 1,791	$ 10	1,226,269	(24,110)	18,059	1,222,019	710,323	8,004
Beginning balance (in shares) at Dec. 31, 2019		180,877,597	1,016,799	180,878,000	1,017,000
Beginning balance at Dec. 31, 2019	1,947,913			$ 1,809	$ 10	1,232,433	(21,496)	15,764	1,228,520	690,242	29,151
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of private perpetual in exchange for common shares										(789)	789
Conversion of operating partnership units and Class B shares to Class A shares (in shares)				5,160,000	(6,000)
Conversion of operating partnership units and Class B shares to Class A shares	0			$ 52		24,153	(302)		23,903	(23,903)
Repurchases of common shares (in shares)				(14,205,000)
Repurchases of common shares	(121,950)			$ (142)		(95,434)		(26,374)	(121,950)
Equity compensation:
LTIP units	19,455									19,455
Restricted stock, net of forfeitures (in shares)				148,000
Restricted stock, net of forfeitures	719					719			719
Dividends and distributions	(65,369)							(37,181)	(37,181)	(25,041)	(3,147)
Net income (loss)	(23,599)							(16,502)	(16,502)	(10,244)	3,147
Other comprehensive income (loss)	(13,354)						(8,240)		(8,240)	(5,114)
Ending balance (in shares) at Sep. 30, 2020		171,981,257	1,010,832	171,981,000	1,011,000
Ending balance at Sep. 30, 2020	1,743,815			$ 1,719	$ 10	1,161,871	(30,038)	(64,293)	1,069,269	644,606	29,940
Beginning balance (in shares) at Jun. 30, 2020				172,333,000	1,014,000
Beginning balance at Jun. 30, 2020	1,756,038			$ 1,723	$ 10	1,166,451	(31,874)	(56,089)	1,080,221	645,877	29,940
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Conversion of operating partnership units and Class B shares to Class A shares (in shares)				782,000	(3,000)
Conversion of operating partnership units and Class B shares to Class A shares	0			$ 8		2,419	(41)		2,386	(2,386)
Repurchases of common shares (in shares)				(1,134,000)
Repurchases of common shares	(7,345)			$ (12)		(7,333)			(7,345)
Equity compensation:
LTIP units	5,170									5,170
Restricted stock, net of forfeitures	334					334			334
Dividends and distributions	(1,050)										(1,050)
Net income (loss)	(12,269)							(8,204)	(8,204)	(5,115)	1,050
Other comprehensive income (loss)	2,937						1,877		1,877	1,060
Ending balance (in shares) at Sep. 30, 2020		171,981,257	1,010,832	171,981,000	1,011,000
Ending balance at Sep. 30, 2020	$ 1,743,815			$ 1,719	$ 10	$ 1,161,871	$ (30,038)	$ (64,293)	$ 1,069,269	$ 644,606	$ 29,940

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash Flows From Operating Activities
Net income (loss)	$ (23,599)	$ 55,570
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	143,609	135,179
Impairment charges	6,204	0
Amortization of non-cash items within interest expense	6,803	5,400
Amortization of acquired above- and below-market leases, net	(2,953)	(5,780)
Amortization of acquired below-market ground leases	5,873	5,873
Straight-lining of rental revenue	(5,878)	(13,781)
Equity based compensation	20,174	15,392
Settlement of derivative contract	(20,281)	0
Loss on early extinguishment of debt	86	0
Increase (decrease) in cash flows due to changes in operating assets and liabilities:
Security deposits	20,697	(25,961)
Tenant and other receivables	(431)	149
Deferred leasing costs	(8,241)	(14,513)
Prepaid expenses and other assets	14,680	19,883
Accounts payable and accrued expenses	(1,699)	(2,970)
Deferred revenue and other liabilities	8,509	23,932
Net cash provided by operating activities	163,553	198,373
Cash Flows From Investing Activities
Short-term investments	0	400,000
Development costs	(1,336)	(2)
Additions to building and improvements	(112,018)	(189,666)
Net cash (used in) provided by investing activities	(113,354)	210,332
Cash Flows From Financing Activities
Repayment of mortgage notes payable	(2,939)	(2,829)
Proceeds from unsecured senior notes	175,000	0
Repayment of unsecured senior notes	0	(250,000)
Proceeds from unsecured term loan	175,000	0
Repayment of unsecured term loan	(50,000)	0
Proceeds from unsecured revolving credit facility	550,000	0
Repayment of unsecured revolving credit facility	(550,000)	0
Deferred financing costs	(3,585)	0
Repurchases of common shares	(121,950)	0
Private perpetual preferred unit distributions	(3,147)	(702)
Dividends paid to common stockholders	(37,181)	(56,098)
Distributions paid to non-controlling interests in the operating partnership	(25,041)	(39,570)
Net cash provided by (used in) financing activities	106,157	(349,199)
Net increase in cash and cash equivalents and restricted cash	156,356	59,506
Cash and cash equivalents and restricted cash—beginning of period	271,597	270,813
Cash and cash equivalents and restricted cash—end of period	427,953	330,319
Reconciliation of Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents at beginning of period	233,946	204,981
Restricted cash at beginning of period	37,651	65,832
Cash and cash equivalents at end of period	373,088	293,710
Restricted cash at end of period	54,865	36,609
Cash and cash equivalents and restricted cash	427,953	330,319
Supplemental disclosures of cash flow information:
Cash paid for interest	57,170	59,173
Cash paid for income taxes	1,197	1,589
Non-cash investing and financing activities:
Building and improvements included in accounts payable and accrued expenses	63,984	77,142
Write-off of fully depreciated assets	54,992	26,516
Derivative instruments at fair values included in accounts payable and accrued expenses	10,222	28,850
Conversion of operating partnership units and Class B shares to Class A shares	23,903	21,654
Issuance of Series 2019 private perpetual preferred in exchange for common shares	789	0
Right of use assets	0	29,452
Ground lease liabilities	$ 0	$ 29,452

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Description of Business and Organization

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business and Organization

Description of Business and Organization

As used in these condensed consolidated financial statements, unless the context otherwise requires, “we,” “us,” “our,” the “company,” and "ESRT" mean Empire State Realty Trust, Inc. and its consolidated subsidiaries.

    We are a self-administered and self-managed real estate investment trust ("REIT") that owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area.

As of September 30, 2020, our total portfolio contained 10.1 million rentable square feet of office and retail space. We owned 14 office properties (including three long-term ground leasehold interests) encompassing approximately 9.4 million rentable square feet of office space. Nine of these properties are located in the midtown Manhattan market and aggregate approximately 7.6 million rentable square feet of office space, including the Empire State Building. Our Manhattan office 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 five office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing in the aggregate approximately 1.8 million rentable square feet. The majority of square footage for these five properties is 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 September 30, 2020, our portfolio included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing approximately 0.2 million rentable square feet in the aggregate.

We were organized as a Maryland corporation on July 29, 2011 and commenced operations upon completion of our initial public offering and related formation transactions on October 7, 2013. Our operating partnership, Empire State Realty OP, L.P. (the "Operating Partnership"), holds substantially all of our assets and conducts substantially all of our business. As of September 30, 2020, we owned approximately 60.0% of the aggregate operating partnership units in the Operating Partnership. We, as the sole general partner in the Operating Partnership, have responsibility and discretion in the management and control of the Operating Partnership, and the limited partners in the Operating Partnership, in such capacity, have no authority to transact business for, or participate in the management activities of, the Operating Partnership. Accordingly, the Operating Partnership has been consolidated by us. We elected to be taxed as a REIT and operate in a manner that we believe allows us to qualify as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2013.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

There have been no material changes to the summary of significant accounting policies included in the section entitled "Summary of Significant Accounting Policies" in our December 31, 2019 Annual Report on Form 10-K.

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. In the opinion of management, all adjustments and eliminations (including intercompany balances and transactions), consisting of normal recurring adjustments, considered necessary for the fair presentation of the financial statements have been included.

    The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the corresponding full years. These financial statements should be read in conjunction with the financial statements and accompanying notes included in the financial statements for the year ended December 31, 2019 contained in our Annual Report on Form 10-K. We do not consider our business to be subject to material seasonal fluctuations, except that our observatory business is subject to tourism seasonality and currently impacted by the COVID-19 pandemic. Historically, 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.

We consolidate entities in which we have a controlling financial interest.  In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members.  For variable interest entities ("VIE"), we consolidate the entity if we are deemed to have a variable interest in the entity and through that interest we are deemed the primary beneficiary. The primary beneficiary of a VIE is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. The primary beneficiary is required to consolidate the VIE. The Operating Partnership is a variable interest entity of our company, Empire State Realty Trust, Inc.  As the Operating Partnership is already consolidated in the financial statements of Empire State Realty Trust, Inc., the identification of this entity as a variable interest entity has no impact on our consolidated financial statements.

We will assess the accounting treatment for each investment we may have in the future. This assessment will include a review of each entity’s organizational agreement to determine which party has what rights and whether those rights are protective or participating. For all VIEs, we will review such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity’s economic performance and benefit. In situations where we or our partner could approve, among other things, the annual budget, or leases that cover more than a nominal amount of space relative to the total rentable space at each property, we would not consolidate the investment as we consider these to be substantive participation rights that result in shared power of the activities that would most significantly impact the performance and benefit of such joint venture investment.

A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests are required to be presented as a separate component of equity in the condensed consolidated balance sheets and in the condensed consolidated statements of operations by requiring earnings and other comprehensive income to be attributed to controlling and non-controlling interests.

Accounting Estimates

The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to use estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Significant items subject to such estimates and assumptions include allocation of the purchase price of acquired real estate properties among tangible and intangible assets, determination of the useful life of real estate properties and other long-lived assets, valuation and impairment analysis of commercial real estate properties, right of use assets and other long-lived and indefinite lived assets, estimate of tenant expense reimbursements, valuation of the allowance for doubtful accounts, and valuation of derivative instruments, ground lease liabilities, senior unsecured notes, mortgage notes payable, unsecured term loan and revolving credit facilities, and equity based compensation. These estimates are prepared using management’s best judgment, after considering past, current, and expected events and economic conditions. Actual results could differ from those estimates.

Revenue Recognition

For Coronavirus 2019 (“COVID-19”) pandemic related rent deferral agreements, we will generally elect to record rental revenue and a receivable during the deferral period.

Recently Issued or Adopted Accounting Standards

During April 2020, the Financial Accounting Standards Board ("FASB") staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 global pandemic. Under existing lease guidance, the entity would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant, which would be accounted for under the lease modification framework, or if a lease concession was under the enforceable rights and obligations that existed in the original lease, which would be accounted for outside the lease modification framework. The Lease Modification Q&A provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease. This election is only available when total cash flows resulting from the modified lease are substantially similar to the cash flows in the original lease.

During March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

During January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which contain amendments that modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Because these amendments eliminate Step 2 from the goodwill impairment test, they should reduce the cost and complexity of evaluating goodwill for impairment. ASU No. 2017-04 should be applied on a prospective basis and the amendments adopted for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We adopted this standard and related amendments on January 1, 2020 and such adoption did not have a material impact our consolidated financial statements.

During June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which contains amendments that replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. During November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment of receivables arising from operating leases should be accounted in accordance with ASU No. 2016-02, Leases (Topic 842). ASU No. 2016-13 and ASU No. 2018-19 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Earlier adoption as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, is permitted. The amendments must be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified retrospective approach). We adopted these standards on January 1, 2020 and such adoption did not have a material impact our consolidated financial statements.

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Deferred Costs, Acquired Lease Intangibles and Goodwill

9 Months Ended

Sep. 30, 2020

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Deferred Costs, Acquired Lease Intangibles and Goodwill

Deferred Costs, Acquired Lease Intangibles and Goodwill

Deferred costs, net, consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):  

	September 30, 2020			December 31, 2019
Leasing costs	$	200,684		$	199,033
Acquired in-place lease value and deferred leasing costs	186,766			200,296
Acquired above-market leases	44,449			49,213
	431,899			448,542
Less: accumulated amortization	(226,802		)	(224,598		)
Total deferred costs, net, excluding net deferred financing costs	$	205,097		$	223,944

At September 30, 2020 and December 31, 2019, $2.7 million and $4.2 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 sheet.

Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $5.4 million and $6.2 million for the three months ended September 30, 2020 and 2019, respectively, and $17.7 million and $18.3 million for the nine months ended September 30, 2020 and 2019, respectively. Amortization expense related to acquired lease intangibles was $1.5 million and $2.4 million for the three months ended September 30, 2020 and 2019, respectively, and $5.9 million and $8.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Amortizing acquired intangible assets and liabilities consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020			December 31, 2019
Acquired below-market ground leases	$	396,916		$	396,916
Less: accumulated amortization	(50,223		)	(44,350		)
Acquired below-market ground leases, net	$	346,693		$	352,566

	September 30, 2020			December 31, 2019
Acquired below-market leases	$	(82,891	)	$	(100,472	)
Less: accumulated amortization	49,486			60,793
Acquired below-market leases, net	$	(33,405	)	$	(39,679	)

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $0.7 million and $1.7 million for the three months ended September 30, 2020 and 2019, respectively, and $3.0 million and $5.8 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, 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 segment.

In compliance with the requirements of authorities, we closed the Empire State Building Observatory on March 16, 2020 due to the COVID-19 pandemic and it remained closed until the 86th floor observation deck was reopened on July 20, 2020. The 102nd observation deck was reopened on August 24, 2020. The closure of our Observatory and subsequent reopening under international, national, and local travel restrictions and quarantines caused us during the quarter to choose to perform an impairment test related to goodwill. We engaged a third-party valuation consulting firm to perform the valuation process. Based upon the results of the goodwill impairment test of the stand-alone Observatory reporting unit, which is after the intercompany rent expense paid to the Real Estate reporting unit, we determined that the fair value of the Observatory reporting unit exceeded its carrying value by less than 5.0%.  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 and that continued assessment may again utilize a third-party valuation consulting firm.

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Debt

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Debt

Debt

Debt consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

	Principal Balance						As of September 30, 2020
	September 30, 2020			December 31, 2019			Stated Rate		Effective Rate(1)		Maturity Date(2)
Mortgage debt collateralized by:
Fixed rate mortgage debt
Metro Center	$	87,957		$	89,650		3.59	%	3.67	%	11/5/2024
10 Union Square	50,000			50,000			3.70	%	3.97	%	4/1/2026
1542 Third Avenue	30,000			30,000			4.29	%	4.53	%	5/1/2027
First Stamford Place(3)	180,000			180,000			4.28	%	4.77	%	7/1/2027
1010 Third Avenue and 77 West 55th Street	37,673			38,251			4.01	%	4.21	%	1/5/2028
10 Bank Street	32,252			32,920			4.23	%	4.36	%	6/1/2032
383 Main Avenue	30,000			30,000			4.44	%	4.55	%	6/30/2032
1333 Broadway	160,000			160,000			4.21	%	4.29	%	2/5/2033
Total mortgage debt	607,882			610,821
Senior unsecured notes:(4)
Series A	100,000			100,000			3.93	%	3.96	%	3/27/2025
Series B	125,000			125,000			4.09	%	4.12	%	3/27/2027
Series C	125,000			125,000			4.18	%	4.21	%	3/27/2030
Series D	115,000			115,000			4.08	%	4.11	%	1/22/2028
Series E	160,000			160,000			4.26	%	4.27	%	3/22/2030
Series F	175,000			175,000			4.44	%	4.45	%	3/22/2033
Series G	100,000			—			3.61	%	4.89	%	3/17/2032
Series H	75,000			—			3.73	%	5.00	%	3/17/2035
Unsecured revolving credit facility (4)	—			—			LIBOR plus 1.10%		2.03	%	8/29/2021
Unsecured term loan facility (4)	215,000			265,000			LIBOR plus 1.20%		3.77	%	3/19/2025
Unsecured term loan facility (4)	175,000			—			LIBOR plus 1.50%		2.99	%	12/31/2026
Total principal	1,972,882			1,675,821
Deferred financing costs, net	(9,289		)	(7,247		)
Total	$	1,963,593		$	1,668,574

______________

(1) The effective rate is the yield as of September 30, 2020 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 $16 million loan bearing interest at 6.25%.

(4) At September 30, 2020, we were in compliance with all debt covenants.

Principal Payments

Aggregate required principal payments at September 30, 2020 are as follows (amounts in thousands):

Year	Amortization		Maturities		Total
2020	$	998	$	—	$	998
2021	4,090		—		4,090
2022	5,628		—		5,628
2023	7,876		—		7,876
2024	7,958		77,675		85,633
Thereafter	25,909		1,842,748		1,868,657
Total	$	52,459	$	1,920,423	$	1,972,882

Deferred Financing Costs

Deferred financing costs, net, consisted of the following at September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020			December 31, 2019
Financing costs	$	28,814		$	25,315
Less: accumulated amortization	(16,848		)	(13,863		)
Total deferred financing costs, net	$	11,966		$	11,452

At September 30, 2020 and December 31, 2019, $2.7 million and $4.2 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 sheet.

Amortization expense related to deferred financing costs was $1.0 million and $0.9 million for the three months ended September 30, 2020 and 2019, respectively, and $3.0 million and $2.9 million for the nine months ended September 30, 2020 and 2019, respectively.

Unsecured Revolving Credit and Term Loan Facilities

On March 19, 2020, through our Operating Partnership, we entered into an amendment to an existing credit agreement with the lenders party thereto, Bank of America, N.A., as administrative agent, and Bank of America, Wells Fargo Bank, National Association and Capital One, National Association, as the letter of credit issuers party thereto. The amendment amends the amended and restated senior unsecured revolving credit and term loan facility, entered into as of August 29, 2017, with Bank of America, N.A., as administrative agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC as Joint Lead Arrangers and Joint Bookrunners, Wells Fargo, National Association and Capital One, National Association, as co-syndication agents, and the lenders party thereto.

This new amended and restated senior unsecured revolving credit and term loan facility (the "Credit Facility") is in the original principal amount of up to $1.315 billion, which consists of a $1.1 billion revolving credit facility and a $215.0 million term loan facility. We borrowed the term loan facility in full at closing. We may request the Credit Facility be increased through one or more increases in the revolving credit facility or one or more increases in the term loan facility or the addition of new pari passu term loan tranches, for a maximum aggregate principal amount not to exceed $1.75 billion. As of September 30, 2020, we had no borrowings under the revolving credit facility and $215.0 million under the term loan facility.

The initial maturity of the unsecured revolving credit facility is August 2021. We have the option to extend the initial term for up to two additional 6-month periods, subject to certain conditions, including the payment of an extension fee equal to 0.0625% and 0.075% of the then outstanding commitments under the unsecured revolving credit facility on the first and the second extensions, respectively. The term loan facility matures in March 2025. We may prepay the loans under the Credit Facility at any time in whole or in part, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar Rate borrowings.

On March 19, 2020, we entered into a senior unsecured term loan facility (the “Term Loan Facility”) with Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Securities, LLC as sole bookrunner, Wells Fargo Securities, LLC, Capital One, National Association, U.S. Bank National Association and SunTrust Robinson Humphrey, Inc. as Joint Lead Arrangers, Capital One, National Association, as syndication agent, U.S. Bank National Association and Truist Bank, as documentation agents, and the lenders party thereto.

The Term Loan Facility is in the original principal amount of $175 million which we borrowed in full at closing. We may request the 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 September 30, 2020, our borrowings amounted to $175.0 million under the Term Loan Facility.

The Term Loan Facility matures on December 31, 2026. We may prepay loans under the Term Loan Facility at any time in whole or in part, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar rate borrowings and, if the prepayment occurs on or before December 31, 2021, a prepayment fee. If the prepayment occurs on or prior to December 31, 2020, the prepayment fee is equal to 2.0% of the principal amount prepaid, and if the prepayment occurs after December 31, 2020 but on or prior to December 31, 2021, the prepayment fee is equal to 1.0% of the principal amount prepaid.

The terms of both the Credit Facility and the 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. It also requires 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 agreement also contains 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, 2020, we were in compliance with the covenants under the Credit Facility and the Term Loan Facility.

Senior Unsecured Notes

On March 17, 2020, through the Operating Partnership, we entered into an agreement to issue and sell an aggregate $175 million of senior unsecured notes, consisting of (a) $100 million aggregate principal amount of 3.61% Series G Senior Notes due March 17, 2032 (the “Series G Notes”) and (b) $75 million aggregate principal amount of 3.73% Series H Senior Notes due March 17, 2035 (the “Series H Notes”). The issue price for the Series G and H Notes was 100% of the aggregate principal amount thereof.

The terms of the Series G and H Notes agreement include customary covenants, including limitations on liens, investment, distributions, debt, fundamental changes, and transactions with affiliates and require certain customary financial reports. It also requires 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 agreement also contains 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 September 30, 2020, we were in compliance with the covenants under the outstanding senior unsecured notes.

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Accounts Payable and Accrued Expenses

9 Months Ended

Sep. 30, 2020

Payables and Accruals [Abstract]

Accounts Payable and Accrued Expenses

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020		December 31, 2019
Accrued capital expenditures	$	63,984	$	90,910
Accounts payable and accrued expenses	34,114		35,084
Interest rate swap agreements liability	10,222		13,330
Accrued interest payable	2,792		3,699
Due to affiliated companies	806		763
Total accounts payable and accrued expenses	$	111,918	$	143,786

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Financial Instruments and Fair Values

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Financial Instruments and Fair Values

Financial Instruments and Fair Values

Derivative Financial Instruments

We use derivative financial instruments primarily to manage interest rate risk and such derivatives are not considered speculative. These derivative instruments are typically in the form of interest rate swap and forward agreements and the primary objective is to minimize interest rate risks associated with investing and financing activities. The counterparties of these arrangements are major financial institutions with which we may also have other financial relationships. We are exposed to credit risk in the event of non-performance by these counterparties; however, we currently do not anticipate that any of the counterparties will fail to meet their obligations.

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 September 30, 2020, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $10.3 million. If we had breached any of these provisions at September 30, 2020, we could have been required to settle our obligations under the agreements at their termination value of $10.3 million.

As of September 30, 2020 and December 31, 2019, we had interest rate LIBOR swaps with an aggregate notional value of $265.0 million and $390.0 million, respectively. The notional value does not represent exposure to credit, interest rate or market risks. As of September 30, 2020 and December 31, 2019, the fair value of our derivative instruments amounted to $(10.2) million and $(13.3) million, respectively, which is included in accounts payable and accrued expenses 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.

As of September 30, 2020 and 2019, our cash flow hedges are deemed highly effective and a net unrealized gain (loss) of $2.9 million and $(5.9) million for the three months ended September 30, 2020 and 2019, respectively, and a net unrealized gain (loss) of $(13.4) million and $(25.4) million for the nine months ended September 30, 2020 and 2019, 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 income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the debt. We estimate that $(11.5) million net loss 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 September 30, 2020 and December 31, 2019 (dollar amounts in thousands):     

							September 30, 2020					December 31, 2019
Derivative	Notional Amount		Receive Rate	Pay Rate	Effective Date	Expiration Date	Asset		Liability			Asset		Liability
Interest rate swap	$	265,000	1 Month LIBOR	2.1485%	August 31, 2017	August 24, 2022	$	—	$	(10,222	)	$	—	$	(4,247	)
Interest rate swap	125,000		3 Month LIBOR	2.9580%	July 1, 2019	N/A	—		—			—		(9,083		)
							$	—	$	(10,222	)	$	—	$	(13,330	)

During the nine months ended September 30, 2020, we terminated the $125.0 million swap and paid a settlement fee of $20.3 million.

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, 2020 and 2019 (amounts in thousands):    

	Three Months Ended						Nine Months Ended
Effects of Cash Flow Hedges	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Amount of gain (loss) recognized in other comprehensive income (loss)	$	64		$	(6,256	)	$	(19,340	)	$	(25,992	)
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense	(2,873		)	(319		)	(5,986		)	(637		)

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, 2020 and 2019 (amounts in thousands):

	Three Months Ended						Nine Months Ended
Effects of Cash Flow Hedges	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Total interest (expense) presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded	$	(23,360	)	$	(19,426	)	$	(66,906	)	$	(60,712	)
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense	(2,873		)	(319		)	(5,986		)	(637		)

Fair Valuation

The estimated fair values at September 30, 2020 and December 31, 2019 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. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The fair value of derivative instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. Although the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counterparties. The impact of such credit valuation adjustments, determined based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of our derivatives were classified as Level 2 of the fair value hierarchy.

The fair value of our mortgage notes payable, senior unsecured notes - Series A, B, C, D, E, F, G and H, unsecured term loan facilities, unsecured revolving credit facility and ground lease liabilities 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 to us.

The following tables summarize the carrying and estimated fair values of our financial instruments as of September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020
			Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3
Interest rate swaps included in accounts payable and accrued expenses	$	10,222	$	10,222	$	—	$	10,222	$	—
Mortgage notes payable	603,178		636,032		—		—		636,032
Senior unsecured notes - Series A, B, C, D, E, F, G and H	973,106		1,055,971		—		—		1,055,971
Unsecured term loan facilities	387,309		390,000		—		—		390,000

    

	December 31, 2019
			Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3
Interest rate swaps included in accounts payable and accrued expenses	$	13,330	$	13,330	$	—	$	13,330	$	—
Mortgage notes payable	605,542		629,609		—		—		629,609
Senior unsecured notes - Series A, B, C, D, E and F	798,392		843,394		—		—		843,394
Unsecured term loan facility	264,640		265,000		—		—		265,000

Disclosure about the fair value of financial instruments is based on pertinent information available to us as of September 30, 2020 and December 31, 2019. 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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Leases

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

Leases

Lessor    

We lease various spaces to tenants over terms ranging from one to 21 years. Certain leases have renewal options for additional terms. 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 September 30, 2020 and 2019 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 nine months ended September 30, 2020 and 2019 are as follows (amounts in thousands):

	Three Months Ended				Nine Months Ended
Rental revenue	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Fixed payments	$	122,976	$	129,030	$	375,882	$	380,647
Variable payments	16,933		21,195		50,139		54,066
Total rental revenue	$	139,909	$	150,225	$	426,021	$	434,713

As of September 30, 2020, 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 2038 (amounts in thousands):

Remainder of 2020	$	126,997
2021	502,160
2022	484,131
2023	459,992
2024	423,039
Thereafter	2,139,096
	$	4,135,415

The above future minimum lease payments exclude tenant recoveries, amortization of deferred rent receivables and the net accretion of above-below-market lease intangibles. Some leases are subject to termination options generally upon payment of a termination fee. The preceding table is prepared assuming such options are not exercised.

Lessee

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 $29.2 million and lease liabilities of $29.2 million in our consolidated balance sheet as of September 30, 2020. 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. Right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Variable lease payments are excluded from the right-of-use assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

We make payments under ground leases related to three of our properties. The ground leases are due to expire between the years 2050 and 2077, inclusive of extension options, and have no variable payments or residual value guarantees. As our leases do not provide an implicit rate, we determined our incremental borrowing rate based on information available at the date of adoption of ASU No. 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 September 30, 2020 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 September 30, 2020 was 49.6 years.

As of September 30, 2020, 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 2020	$	380
2021	1,518
2022	1,518
2023	1,518
2024	1,518
Thereafter	66,780
Total undiscounted cash flows	73,232
Present value discount	(44,078		)
Ground lease liabilities	$	29,154

Leases

Leases

Lessor    

We lease various spaces to tenants over terms ranging from one to 21 years. Certain leases have renewal options for additional terms. 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 September 30, 2020 and 2019 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 nine months ended September 30, 2020 and 2019 are as follows (amounts in thousands):

	Three Months Ended				Nine Months Ended
Rental revenue	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Fixed payments	$	122,976	$	129,030	$	375,882	$	380,647
Variable payments	16,933		21,195		50,139		54,066
Total rental revenue	$	139,909	$	150,225	$	426,021	$	434,713

As of September 30, 2020, 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 2038 (amounts in thousands):

Remainder of 2020	$	126,997
2021	502,160
2022	484,131
2023	459,992
2024	423,039
Thereafter	2,139,096
	$	4,135,415

The above future minimum lease payments exclude tenant recoveries, amortization of deferred rent receivables and the net accretion of above-below-market lease intangibles. Some leases are subject to termination options generally upon payment of a termination fee. The preceding table is prepared assuming such options are not exercised.

Lessee

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 $29.2 million and lease liabilities of $29.2 million in our consolidated balance sheet as of September 30, 2020. 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. Right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Variable lease payments are excluded from the right-of-use assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

We make payments under ground leases related to three of our properties. The ground leases are due to expire between the years 2050 and 2077, inclusive of extension options, and have no variable payments or residual value guarantees. As our leases do not provide an implicit rate, we determined our incremental borrowing rate based on information available at the date of adoption of ASU No. 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 September 30, 2020 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 September 30, 2020 was 49.6 years.

As of September 30, 2020, 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 2020	$	380
2021	1,518
2022	1,518
2023	1,518
2024	1,518
Thereafter	66,780
Total undiscounted cash flows	73,232
Present value discount	(44,078		)
Ground lease liabilities	$	29,154

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Proceedings

Except as described below, as of September 30, 2020, 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.

As previously disclosed, in October 2014, 12 former investors (the "Claimants") in Empire State Building Associates L.L.C. (“ESBA”), which prior to the initial public offering of our company (the "Offering"), owned the fee title to the Empire

State Building, filed an arbitration with the American Arbitration Association against Peter L. Malkin, Anthony E. Malkin, Thomas N. Keltner, Jr., and our subsidiary ESRT MH Holdings LLC, the former supervisor of ESBA (the "Respondents"). The statement of claim (also filed later in federal court in New York for the expressed purpose of tolling the statute of limitations) alleges breach of fiduciary duty and related claims in connection with the Offering and formation transactions and seeks monetary damages and declaratory relief. Claimants had opted out of a prior class action bringing similar claims that was settled with court approval. Respondents filed an answer and counterclaims. In March 2015, the federal court action was stayed on consent of all parties pending the arbitration. Arbitration hearings started in May 2016 and concluded in August 2018. On August 26, 2020, the arbitration panel issued an award that denied all Claimants’ claims with one exception, on which it awarded Claimants approximately $1.2 million, inclusive of seven years of interest through October 2, 2020.

Respondents believe that such award in favor of the Claimants is entirely without merit, and are in active discussion about their next steps.

     Pursuant to indemnification agreements which were made with our directors, executive officers and chairman emeritus as part of our formation transactions, Anthony E. Malkin, Peter L. Malkin and Thomas N. Keltner, Jr. have defense and indemnity rights from us with respect to this arbitration.

Unfunded Capital Expenditures

At September 30, 2020, we estimate that we will incur approximately $130.1 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. Future property acquisitions may require substantial capital investments for refurbishment and leasing costs. We expect that these financing requirements will be met in a similar fashion.

Concentration of Credit Risk

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 September 30, 2020, we held on deposit at various major financial institutions cash and cash equivalents and restricted cash balances in excess of amounts insured by the Federal Deposit Insurance Corporation.

Asset Retirement Obligations

We are required to accrue costs that we are legally obligated to incur on retirement of our properties which result from acquisition, construction, development and/or normal operation of such properties. Retirement includes sale, abandonment or disposal of a property. Under that standard, a conditional asset retirement obligation represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within a company’s control and a liability for a conditional asset retirement obligation must be recorded if the fair value of the obligation can be reasonably estimated. Environmental site assessments and investigations have identified asbestos or asbestos-containing building materials in certain of our properties. As of September 30, 2020, 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. However, ongoing asbestos abatement, maintenance programs and other required documentation are carried out as required and related costs are expensed as incurred.

Other Environmental Matters

Certain of our properties have been inspected for soil contamination due to pollutants, which may have occurred prior to our ownership of these properties or subsequently in connection with its development and/or its use. Required remediation to such properties has been completed, and as of September 30, 2020, 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. We expect that resolution of the environmental matters relating to the above will not have a material impact on our business, assets, consolidated financial condition, results of operations or liquidity. However, we cannot be certain that we have identified all environmental liabilities at our properties, that all necessary remediation actions have been or will be undertaken at our properties or that we will be indemnified, in full or at all, in the event that such environmental liabilities arise.

Insurance Coverage

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.

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Equity

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Equity

Equity

Shares and Units

An operating partnership unit of the Operating Partnership ("OP Unit") and a share of our common stock have essentially the same economic characteristics as they receive the same per unit profit distributions of the Operating Partnership. On the one-year anniversary of issuance, an OP Unit may be tendered for redemption for cash; however, we have sole and absolute discretion, and sufficient authorized common stock, to exchange OP Units for shares of common stock on a one-for-one basis instead of cash.

On May 16, 2019, the Empire State Realty Trust, Inc. Empire State Realty OP, L.P. 2019 Equity Incentive Plan (“2019 Plan”) was approved by our shareholders.  The 2019 Plan provides for grants to directors, employees and consultants of our company and 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 our common stock are authorized for issuance under awards granted pursuant to the 2019 Plan. We will not issue any new equity awards under the First Amended and Restated Empire State Realty Trust, Inc. and Empire State Realty OP, L.P. 2013 Equity Incentive Plan ("2013 Plan", and collectively with the 2019 Plan, "the Plans"). The shares of Class A common stock underlying any awards under the 2019 Plan and the 2013 Plan that are forfeited, canceled or otherwise terminated, other than by exercise, will be added back to the shares of Class A common stock available for issuance under the 2019 Plan. Shares tendered or held back upon exercise of a stock option or settlement of an award under the 2019 Plan or the 2013 Plan to cover the exercise price or tax withholding and shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right upon exercise thereof, will not be added back to the shares of Class A common stock available for issuance under the 2019 Plan. In addition, shares of Class A common stock repurchased on the open market will not be added back to the shares of Class A common stock available for issuance under the 2019 Plan.

Long-term incentive plan ("LTIP") units are a special class of partnership interests in the Operating Partnership. Each LTIP unit awarded will be deemed equivalent to an award of one share of stock under the Plans, reducing the availability for other equity awards on a one-for-one basis.

The vesting period for LTIP units, if any, will be determined at the time of issuance. Under the terms of the LTIP units, the Operating Partnership will revalue for tax purposes its assets upon the occurrence of certain specified events, and any increase in valuation from the time of grant until such event will be allocated first to the holders of LTIP units to equalize the capital accounts of such holders with the capital accounts of OP unitholders. Subject to any agreed upon exceptions, once vested and having achieved parity with OP unitholders, LTIP units are convertible into OP Units in the Operating Partnership on a one-for-one basis.

LTIP units subject to time-based vesting, whether vested or not, receive the same per unit distributions as OP units, which equal per share dividends (both regular and special) on our common stock. Performance based LTIP units receive 10% of such distributions currently, unless and until such LTIP units are earned based on performance, at which time they will receive the accrued and unpaid 90% and will commence receiving 100% of such distributions thereafter.

The following is net income attributable to common stockholders and the issuance of our Class A shares in exchange for the conversion of OP Units into common stock (amounts in thousands):

	Three Months Ended					Nine Months Ended
	September 30, 2020			September 30, 2019		September 30, 2020			September 30, 2019
Net income (loss) attributable to common stockholders	$	(8,204	)	$	15,882	$	(16,502	)	$	32,646
Increase in additional paid-in capital for the conversion of OP Units into common stock	2,419			12,908		24,153			21,773
Change from net income (loss) attributable to common stockholders and transfers from non-controlling interests	$	(5,785	)	$	28,790	$	7,651		$	54,419

As of September 30, 2020, there were 288,375,949 OP Units outstanding, of which 172,992,089, or 60.0%, were owned by us and 115,383,860, or 40.0%, were owned by other partners, including certain directors, officers and other members of executive management.

Stock and Publicly Traded Operating Partnership Unit Repurchase Program

Our Board of Directors reauthorized the repurchase of up to $500 million of our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units through December 31, 2020. Under the program, we may purchase our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units in accordance with applicable securities laws from time to time in the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to stock price, availability, trading volume and general market conditions. The authorization does not obligate us to acquire any particular amount of securities, and the program may be suspended or discontinued at our discretion without prior notice.

The following table summarizes our purchases of equity securities each of the three months ended September 30, 2020 and the month of October 2020:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Approximate Dollar Value Available for Future Purchase (in thousands)
July 2020	656,318	$	6.72	656,318	$	380,982
August 2020	—	$	—	—	$	380,982
September 2020	477,620	$	6.14	477,620	$	378,050
October 2020	1,952,013	$	6.21	1,952,013	$	365,934

Private Perpetual Preferred Units

As of September 30, 2020, 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"). 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. The Series 2019 Preferred Units are not redeemable at the option of the holders and are redeemable at our option only in the case of specific defined events. The Series 2014 Preferred Units which have a liquidation preference of $16.62 per unit and are entitled to receive cumulative preferential annual cash distributions of $0.60 per unit payable in arrears on a quarterly basis. The Series 2014 Preferred Units are not redeemable at the option of the holders and are redeemable at our option only in the case of specific defined events.

Dividends and Distributions

Total dividends paid to common stockholders were $0.0 million and $37.2 million for the three and nine months ended September 30, 2020, respectively, and $18.9 million and $56.1 million for the three and nine months ended September 30, 2019, respectively. Total distributions paid to OP unitholders, excluding inter-company distributions, were $0.0 million and $25.0 million for the three and nine months ended September 30, 2020 respectively, and $13.0 million and $39.6 million for the three and nine months ended September 30, 2019, respectively. Total distributions paid to preferred unitholders were $1.1 million and $3.1 million for the three and nine months ended September 30, 2020, respectively, and $0.2 million and $0.7 million for the three and nine months ended September 30, 2019, 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 our common stock is authorized for issuance under awards granted pursuant to the 2019 Plan, and as of September 30, 2020, 8.5 million shares of common stock remain available for future issuance.

In March 2020, we made grants of LTIP units to executive officers under the 2019 Plan. At such time, we granted to executive officers a total of 745,155 LTIP units that are subject to time-based vesting and 3,358,767 LTIP units that are subject to market-based vesting, with fair market values of $5.6 million for the time-based vesting awards and $14.0 million for the

market-based vesting awards. In March 2020, we made grants of LTIP units and restricted stock to certain other employees under the 2019 Plan. At such time, we granted to certain other employees a total of 113,971 LTIP units and 158,806 shares of restricted stock that are subject to time-based vesting and 502,475 LTIP units that are subject to market-based vesting, with fair market values of $2.3 million for the time-based vesting awards and $2.3 million for the market-based vesting awards. The awards subject to time-based vesting vest ratably over four years from January 1, 2020, subject generally to the grantee's continued employment. The first installment vests on January 1, 2021 and the remainder will vest thereafter in three equal annual installments. The vesting of the LTIP units subject to market-based vesting is based on the achievement of relative total stockholder return hurdles over a three-year performance period, commencing on January 1, 2020. Following the completion of the three-year performance period, our compensation committee will determine the number of LTIP units to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the award grant. These units then vest in two installments, with the first installment vesting on January 1, 2023 and the second installment vesting on January 1, 2024, subject generally to the grantee's continued employment on those dates.

Our named executive officers can elect to receive their annual incentive bonus in any combination of (i) cash or vested LTIP's at the face amount of such bonus or (ii) time-vesting LTIP's which would vest over three years, subject to continued employment, at 125% of such face amount. In March 2020, we made grants of LTIP units to executive officers under the 2019 Plan in connection with the 2019 bonus election program. We granted to executive officers a total of 624,380 LTIP units that are subject to time-based vesting with a fair market value of $4.4 million. Of these LTIP units, 23,049 LTIP units vested immediately on the grant date and 601,331 LTIP units vest ratably over three years from January 1, 2020, subject generally to the grantee's continued employment. The first installment vests on January 1, 2021 and the remainder will vest thereafter in two equal annual installments.

In May 2020, we made grants of LTIP units under the 2019 Plan. At such time, we granted our non-employee directors a total of 171,153 LTIP units that are subject to time-based vesting with fair market values of $1.1 million. These awards vest ratably over three years from the date of the grant, subject generally to the director's continued service on our Board of Directors. We also granted Christina Chiu, our Executive Vice President and Chief Financial Officer, a total of 82,199 LTIP units that are subject to time-based vesting and 116,927 LTIP units that are subject to market-based vesting, with fair market values of $0.5 million for the time-based vesting awards and $0.5 million for the market-based vesting awards. We also granted certain other employees a total of 63,229 LTIP units that are subject to time-based vesting with a fair market value of $0.4 million. The awards subject to time-based vesting vest ratably over three or four years from the date of grant, subject generally to the grantee's continued employment. The first installment vests on the respective grant dates in May 2021 and the remainder will vest thereafter in two or three equal annual installments. The vesting of the LTIP units subject to market-based vesting is based on the achievement of relative total stockholder return hurdles over a three-year performance period, commencing on May 7, 2020. Following the completion of the three-year performance period, our compensation committee will determine the number of LTIP units to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the award grant. These units then vest in two installments, with the first installment vesting on May 7, 2023 and the second installment vesting on May 7, 2024, subject generally to the grantee's continued employment on those dates.

In August 2020, we granted R. Paige Hood, our new non-employee director, a total of 25,242 LTIP units that are subject to time-based vesting with a fair market value of $0.2 million. These awards vest ratably over three years from the date of the grant, subject generally to his continued service on our Board of Directors.

In COVID-19 disrupted markets during the first quarter of 2020, the LTIP units that are subject to market-based vesting were undervalued on initial appraisal, and the resulting number of LTIP units issued in March 2020 was reduced on final appraisal to match the original Board-approved dollar value. In June 2020, we reduced the grants of LTIP units that are subject to market-based vesting which were awarded to executive officers and certain other employees by 666,933 LTIP units with fair market values of $2.8 million and 99,630 LTIP units with fair market values of $0.5 million, respectively.

In March 2019, we made grants of LTIP units to executive officers under the 2013 Plan. At such time, we granted to executive officers a total of 461,693 LTIP units that are subject to time-based vesting and 1,806,520 LTIP units that are subject to market-based vesting, with fair market values of $6.4 million for the time-based vesting awards and $12.8 million for the market-based vesting awards. In March 2019, we made grants of LTIP units and restricted stock to certain other employees under the 2013 Plan. At such time, we granted to certain other employees a total of 61,432 LTIP units and 69,358 shares of restricted stock that are subject to time-based vesting and 113,383 LTIP units that are subject to market-based vesting, with fair market values of $2.0 million for the time-based vesting awards and $0.9 million for the market-based vesting awards. The awards subject to time-based vesting vest ratably over four years from January 1, 2019, subject generally to the grantee's continued employment. The first installment vests on January 1, 2020 and the remainder will vest thereafter in three equal

annual installments. The vesting of the LTIP units subject to market-based vesting is based on the achievement of relative total stockholder return hurdles over a three-year performance period, commencing on January 1, 2019. Following the completion of the three-year performance period, our compensation committee will determine the number of LTIP units to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the award grant. These units then vest in two installments, with the first installment vesting on January 1, 2022 and the second installment vesting on January 1, 2023, subject generally to the grantee's continued employment on those dates.

Our named executive officers can elect to receive their annual incentive bonus in any combination of (i) cash or vested LTIP's at the face amount of such bonus or (ii) time-vesting LTIP's which would vest over three years, subject to continued employment, at 125% of such face amount. In March 2019, we made grants of LTIP units to executive officers under the 2013 Plan in connection with the 2018 bonus election program. We granted to executive officers a total of 334,952 LTIP units that are subject to time-based vesting with a fair market value of $4.6 million. Of these LTIP units, 26,056 LTIP units vested immediately on the grant date and 308,896 LTIP units vest ratably over three years from January 1, 2019, subject generally to the grantee's continued employment. The first installment vests on January 1, 2020 and the remainder will vest thereafter in two equal annual installments.

In October 2019 and May 2019, we made grants of LTIP units to our non-employee directors under the 2019 Plan. In the aggregate, we granted a total of 76,718 LTIP units that are subject to time-based vesting with fair market values of $1.1 million. The awards vest ratably over three years from May 17, 2019, subject generally to the director's continued service on our Board of Directors. The first installment vests on May 17, 2020 and the remainder will vest thereafter in two equal annual installments.

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 or four years, or (ii) the period from the date of grant to the date the employee becomes retirement eligible, which may occur upon grant. An employee is retirement eligible when the employee attains the (i) age of 60 and (ii) the date on which the employee has first completed ten years of continuous service with us or our affiliates. During the second quarter of 2020, the Board approved changing the definition of retirement age from 60 to 65 starting with the grant awards issued in March 2020 under the 2019 Plan. Share-based compensation for market-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 three or four years depending on retirement eligibility.

For the market-based LTIP units, the fair value of the awards was estimated using a Monte Carlo Simulation model and discounted for the restriction period during which the LTIP units cannot be redeemed or transferred and the uncertainty regarding if, and when, the book capital account of the LTIP units will equal that of the common units.  Our stock price, along with the prices of the comparative indexes, is assumed to follow the Geometric Brownian Motion Process.  Geometric Brownian Motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case the stock price) to vary randomly from its current value and take any value greater than zero.  The volatilities of the returns on our stock price and the comparative indexes were estimated based on implied volatilities and historical volatilities using a six-year look-back period.  The expected growth rate of the stock prices over the performance period is determined with consideration of the risk-free rate as of the grant date.  For LTIP unit awards that are time-based, the fair value of the awards was estimated based on the fair value of our stock at the grant date discounted for the restriction period during which the LTIP units cannot be redeemed or transferred and the uncertainty regarding if, and when, the book capital account of the LTIP units will equal that of the common units.  For restricted stock awards that are time-based, we estimate the stock compensation expense based on the fair value of the stock at the grant date.

LTIP units and restricted stock issued during the nine months ended September 30, 2020 were valued at $28.1 million. The weighted average per unit or share fair value was $5.43 for grants issued in 2020. The per unit or share granted in 2020 was estimated on the respective dates of grant using the following assumptions: an expected life from 2.0 to 5.5 years, a dividend rate of 3.70%, a risk-free interest rate from 0.16% to 0.50%, and an expected price volatility from 19.0% to 26.0%.

No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding in 2020.

The following is a summary of restricted stock and LTIP unit activity for the nine months ended September 30, 2020:

	Restricted Stock		LTIP Units		Weighted Average Grant Fair Value
Unvested balance at December 31, 2019	118,918		5,986,569		$	9.73
Vested	(57,599	)	(1,052,692	)	14.04
Granted	161,449		5,011,693		5.43
Forfeited or unearned	(1,136	)	(2,201,453	)	7.57
Unvested balance at September 30, 2020	221,632		7,744,117		$	6.93

The LTIP unit and 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 performance-based awards, and accordingly, we recognized $0.4 million and $2.3 million for the three and nine months ended September 30, 2020, respectively, and $0.3 million and $1.8 million for the three and nine months ended September 30, 2019, respectively. Unrecognized compensation expense was $1.7 million at September 30, 2020, which will be recognized over a weighted average period of 2.3 years.

For the remainder of the LTIP unit and restricted stock awards, we recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized noncash compensation expense of $5.1 million and $17.9 million for the three and nine months ended September 30, 2020, respectively, and $3.4 million and $13.6 million for the three and nine months ended September 30, 2019, respectively. Unrecognized compensation expense was $31.4 million at September 30, 2020, which will be recognized over a weighted average period of 2.3 years.

Earnings Per Share

Earnings per share for the three and nine months ended September 30, 2020 and 2019 is computed as follows (amounts in thousands, except per share amounts):

	Three Months Ended						Nine Months Ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Numerator - Basic:
Net income (loss)	$	(12,269	)	$	26,784		$	(23,599	)	$	55,570
Private perpetual preferred unit distributions	(1,050		)	(234		)	(3,147		)	(702		)
Net income (loss) attributable to non-controlling interests	5,115			(10,668		)	10,244			(22,222		)
Earnings allocated to unvested shares	(24		)	(13		)	(60		)	(33		)
Net income (loss) attributable to common stockholders - basic	$	(8,228	)	$	15,869		$	(16,562	)	$	32,613
Numerator - Diluted:
Net income (loss)	$	(12,269	)	$	26,784		$	(23,599	)	$	55,570
Private perpetual preferred unit distributions	(1,050		)	(234		)	(3,147		)	(702		)
Earnings allocated to unvested shares	(24		)	(13		)	(60		)	(33		)
Net income (loss) attributable to common stockholders - diluted	$	(13,343	)	$	26,537		$	(26,806	)	$	54,835
Denominator:
Weighted average shares outstanding - basic	173,048			178,352			176,299			177,428
Operating partnership units	107,892			119,799			109,341			120,689
Effect of dilutive securities:
Stock-based compensation plans	—			—			—			—
Weighted average shares outstanding - diluted	280,940			298,151			285,640			298,117
Earnings per share:
Basic	$	(0.05	)	$	0.09		$	(0.09	)	$	0.18
Diluted	$	(0.05	)	$	0.09		$	(0.09	)	$	0.18

There were zero and 169,848 antidilutive shares and LTIP units for the three and nine months ended September 30, 2020, respectively, and 452,457 and 288,053 antidilutive shares and LTIP units for the three and nine months ended September 30, 2019, respectively.

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Related Party Transactions

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Supervisory Fee Revenue

We earned supervisory fees from entities affiliated with Anthony E. Malkin, our Chairman and Chief Executive Officer, of $0.2 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively, and $0.7 million and $0.7 million for the nine months ended September 30, 2020 and 2019, 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 $0.1 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2020 and 2019, respectively. These fees are included within third-party management and other fees.

Other

We receive rent generally at market rental rate for 5,447 square feet of leased space from entities affiliated with Anthony E. Malkin at one of our properties. Under the lease, the tenant has the right to cancel such lease without special payment on 90 days’ notice. We also have a shared use agreement with such tenant, to occupy a portion of the leased premises as the office location for Peter L. Malkin, our chairman emeritus and employee, utilizing approximately 15% of the space, for which we pay to such tenant an allocable pro rata share of the cost. We also have agreements with these entities and excluded properties and businesses to provide them with general computer-related support services. Total revenue aggregated $0.1 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2020 and 2019, respectively.

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Segment Reporting

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

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, redevelopment, repositioning and disposition of our traditional real estate assets. Our observatory segment includes the operation of 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 marketing strategies. We account for intersegment sales and rent as if the sales or rent were to third parties, that is, at current market prices.

The following tables provide components of segment profit for each segment for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):

	Three Months Ended September 30, 2020
	Real Estate			Observatory			Intersegment Elimination		Total
Revenues:
Rental revenue	$	139,909		$	—		$	—	$	139,909
Intercompany rental revenue	(2,233		)	—			2,233		—
Observatory revenue	—			4,419			—		4,419
Lease termination fees	331			—			—		331
Third-party management and other fees	283			—			—		283
Other revenue and fees	1,633			—			—		1,633
Total revenues	139,923			4,419			2,233		146,575
Operating expenses:
Property operating expenses	33,836			—			—		33,836
Intercompany rent expense	—			(2,233		)	2,233		—
Ground rent expense	2,331			—			—		2,331
General and administrative expenses	14,517			—			—		14,517
Observatory expenses	—			5,931			—		5,931
Real estate taxes	31,196			—			—		31,196
Impairment charge	2,103			—			—		2,103
Depreciation and amortization	44,679			54			—		44,733
Total operating expenses	128,662			3,752			2,233		134,647
Total operating income (loss)	11,261			667			—		11,928
Other income (expense):
Interest income	360			6			—		366
Interest expense	(23,360		)	—			—		(23,360		)
Loss on early extinguishment of debt	—			—			—		—
IPO litigation expense	(1,165		)	—			—		(1,165		)
Income (loss) before income taxes	(12,904		)	673			—		(12,231		)
Income tax (expense) benefit	(196		)	158			—		(38		)
Net income (loss)	$	(13,100	)	$	831		$	—	$	(12,269	)
Segment assets	$	3,771,476		$	239,238		$	—	$	4,010,714
Expenditures for segment assets	$	30,831		$	516		$	—	$	31,347

	Three Months Ended September 30, 2019
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	150,225		$	—		$	—		$	150,225
Intercompany rental revenue	23,242			—			(23,242		)	—
Observatory revenue	—			37,575			—			37,575
Lease termination fees	2,361			—			—			2,361
Third-party management and other fees	304			—			—			304
Other revenue and fees	2,408			—			—			2,408
Total revenues	178,540			37,575			(23,242		)	192,873
Operating expenses:
Property operating expenses	47,894			—			—			47,894
Intercompany rent expense	—			23,242			(23,242		)	—
Ground rent expense	2,331			—			—			2,331
General and administrative expenses	14,421			—			—			14,421
Observatory expenses	—			9,089			—			9,089
Real estate taxes	29,599			—			—			29,599
Depreciation and amortization	44,253			7			—			44,260
Total operating expenses	138,498			32,338			(23,242		)	147,594
Total operating income	40,042			5,237			—			45,279
Other income (expense):
Interest income	2,269			—			—			2,269
Interest expense	(19,426		)	—			—			(19,426		)
Income before income taxes	22,885			5,237			—			28,122
Income tax expense	(267		)	(1,071		)	—			(1,338		)
Net income	$	22,618		$	4,166		$	—		$	26,784
Segment assets	$	3,659,592		$	265,725		$	—		$	3,925,317
Expenditures for segment assets	$	42,901		$	18,375		$	—		$	61,276

	Nine Months Ended September 30, 2020
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	426,021		$	—		$	—		$	426,021
Intercompany rental revenue	13,356			—			(13,356		)	—
Observatory revenue	—			24,049			—			24,049
Lease termination fees	1,575			—			—			1,575
Third-party management and other fees	930			—			—			930
Other revenue and fees	5,254			—			—			5,254
Total revenues	447,136			24,049			(13,356		)	457,829
Operating expenses:
Property operating expenses	105,054			—			—			105,054
Intercompany rent expense	—			13,356			(13,356		)	—
Ground rent expense	6,994			—			—			6,994
General and administrative expenses	48,617			—			—			48,617
Observatory expenses	—			18,087			—			18,087
Real estate taxes	90,029			—			—			90,029
Impairment charges	6,204			—			—			6,204
Depreciation and amortization	143,522			87			—			143,609
Total operating expenses	400,420			31,530			(13,356		)	418,594
Total operating income (loss)	46,716			(7,481		)	—			39,235
Other income (expense):
Interest income	2,438			91			—			2,529
Interest expense	(66,906		)	—			—			(66,906		)
Loss on early extinguishment of debt	(86		)	—			—			(86		)
IPO litigation expense	(1,165		)	—			—			(1,165		)
Loss before income taxes	(19,003		)	(7,390		)	—			(26,393		)
Income tax (expense) benefit	(692		)	3,486			—			2,794
Net loss	$	(19,695	)	$	(3,904	)	$	—		$	(23,599	)
Expenditures for segment assets	$	77,503		$	2,748		$	—		$	80,251

	Nine Months Ended September 30, 2019
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	434,713		$	—		$	—		$	434,713
Intercompany rental revenue	58,754			—			(58,754		)	—
Observatory revenue	—			91,039			—			91,039
Lease termination fees	3,112			—			—			3,112
Third-party management and other fees	955			—			—			955
Other revenue and fees	6,591			—			—			6,591
Total revenues	504,125			91,039			(58,754		)	536,410
Operating expenses:
Property operating expenses	131,076			—			—			131,076
Intercompany rent expense	—			58,754			(58,754		)	—
Ground rent expense	6,994			—			—			6,994
General and administrative expenses	44,445			—			—			44,445
Observatory expenses	—			25,024			—			25,024
Real estate taxes	86,098			—			—			86,098
Depreciation and amortization	135,157			22			—			135,179
Total operating expenses	403,770			83,800			(58,754		)	428,816
Total operating income	100,355			7,239			—			107,594
Other income (expense):
Interest income	9,907			—			—			9,907
Interest expense	(60,712		)	—			—			(60,712		)
Income before income taxes	49,550			7,239			—			56,789
Income tax expense	(762		)	(457		)	—			(1,219		)
Net income	$	48,788		$	6,782		$	—		$	55,570
Expenditures for segment assets	$	134,865		$	46,703		$	—		$	181,568

During the second quarter 2020, we wrote-off $4.1 million of prior expenditures on a potential energy efficiency project in our real estate segment that is not economically feasible in today's regulatory environment. During the third quarter 2020, we also wrote off $2.1 million of prior expenditures on a build-to-suit development project in our real estate segment that was halted due to reconsideration by the user driven by the COVID-19 pandemic. For the nine months ended September 30, 2020, the total $6.2 million write-off is shown as Impairment charge in the condensed consolidated statements of operations.

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Subsequent Events

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

None.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Basis of Quarterly Presentation

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. In the opinion of management, all adjustments and eliminations (including intercompany balances and transactions), consisting of normal recurring adjustments, considered necessary for the fair presentation of the financial statements have been included.

Principles of Consolidation

The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the corresponding full years. These financial statements should be read in conjunction with the financial statements and accompanying notes included in the financial statements for the year ended December 31, 2019 contained in our Annual Report on Form 10-K. We do not consider our business to be subject to material seasonal fluctuations, except that our observatory business is subject to tourism seasonality and currently impacted by the COVID-19 pandemic.

Principles of Consolidation for Variable Interest Entities

We consolidate entities in which we have a controlling financial interest.  In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members.  For variable interest entities ("VIE"), we consolidate the entity if we are deemed to have a variable interest in the entity and through that interest we are deemed the primary beneficiary. The primary beneficiary of a VIE is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. The primary beneficiary is required to consolidate the VIE. The Operating Partnership is a variable interest entity of our company, Empire State Realty Trust, Inc.  As the Operating Partnership is already consolidated in the financial statements of Empire State Realty Trust, Inc., the identification of this entity as a variable interest entity has no impact on our consolidated financial statements.

We will assess the accounting treatment for each investment we may have in the future. This assessment will include a review of each entity’s organizational agreement to determine which party has what rights and whether those rights are protective or participating. For all VIEs, we will review such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity’s economic performance and benefit. In situations where we or our partner could approve, among other things, the annual budget, or leases that cover more than a nominal amount of space relative to the total rentable space at each property, we would not consolidate the investment as we consider these to be substantive participation rights that result in shared power of the activities that would most significantly impact the performance and benefit of such joint venture investment.

A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests are required to be presented as a separate component of equity in the condensed consolidated balance sheets and in the condensed consolidated statements of operations by requiring earnings and other comprehensive income to be attributed to controlling and non-controlling interests.

Accounting Estimates

The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to use estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Significant items subject to such estimates and assumptions include allocation of the purchase price of acquired real estate properties among tangible and intangible assets, determination of the useful life of real estate properties and other long-lived assets, valuation and impairment analysis of commercial real estate properties, right of use assets and other long-lived and indefinite lived assets, estimate of tenant expense reimbursements, valuation of the allowance for doubtful accounts, and valuation of derivative instruments, ground lease liabilities, senior unsecured notes, mortgage notes payable, unsecured term loan and revolving credit facilities, and equity based compensation. These estimates are prepared using management’s best judgment, after considering past, current, and expected events and economic conditions. Actual results could differ from those estimates.

Revenue Recognition

For Coronavirus 2019 (“COVID-19”) pandemic related rent deferral agreements, we will generally elect to record rental revenue and a receivable during the deferral period.

Recently Issued or Adopted Accounting Standards

During April 2020, the Financial Accounting Standards Board ("FASB") staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 global pandemic. Under existing lease guidance, the entity would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant, which would be accounted for under the lease modification framework, or if a lease concession was under the enforceable rights and obligations that existed in the original lease, which would be accounted for outside the lease modification framework. The Lease Modification Q&A provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease. This election is only available when total cash flows resulting from the modified lease are substantially similar to the cash flows in the original lease.

During March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

During January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which contain amendments that modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Because these amendments eliminate Step 2 from the goodwill impairment test, they should reduce the cost and complexity of evaluating goodwill for impairment. ASU No. 2017-04 should be applied on a prospective basis and the amendments adopted for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We adopted this standard and related amendments on January 1, 2020 and such adoption did not have a material impact our consolidated financial statements.

During June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which contains amendments that replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. During November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of Topic 326. Instead, impairment of receivables arising from operating leases should be accounted in accordance with ASU No. 2016-02, Leases (Topic 842). ASU No. 2016-13 and ASU No. 2018-19 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Earlier adoption as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, is permitted. The amendments must be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified retrospective approach). We adopted these standards on January 1, 2020 and such adoption did not have a material impact our consolidated financial statements.

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Deferred Costs, Acquired Lease Intangibles and Goodwill (Tables)

9 Months Ended

Sep. 30, 2020

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Deferred costs, net

Deferred costs, net, consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):  

	September 30, 2020			December 31, 2019
Leasing costs	$	200,684		$	199,033
Acquired in-place lease value and deferred leasing costs	186,766			200,296
Acquired above-market leases	44,449			49,213
	431,899			448,542
Less: accumulated amortization	(226,802		)	(224,598		)
Total deferred costs, net, excluding net deferred financing costs	$	205,097		$	223,944

Deferred financing costs, net, consisted of the following at September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020			December 31, 2019
Financing costs	$	28,814		$	25,315
Less: accumulated amortization	(16,848		)	(13,863		)
Total deferred financing costs, net	$	11,966		$	11,452

Amortizing acquired intangible assets and liabilities

Amortizing acquired intangible assets and liabilities consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020			December 31, 2019
Acquired below-market ground leases	$	396,916		$	396,916
Less: accumulated amortization	(50,223		)	(44,350		)
Acquired below-market ground leases, net	$	346,693		$	352,566

	September 30, 2020			December 31, 2019
Acquired below-market leases	$	(82,891	)	$	(100,472	)
Less: accumulated amortization	49,486			60,793
Acquired below-market leases, net	$	(33,405	)	$	(39,679	)

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Debt (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Long-term debt

Debt consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

	Principal Balance						As of September 30, 2020
	September 30, 2020			December 31, 2019			Stated Rate		Effective Rate(1)		Maturity Date(2)
Mortgage debt collateralized by:
Fixed rate mortgage debt
Metro Center	$	87,957		$	89,650		3.59	%	3.67	%	11/5/2024
10 Union Square	50,000			50,000			3.70	%	3.97	%	4/1/2026
1542 Third Avenue	30,000			30,000			4.29	%	4.53	%	5/1/2027
First Stamford Place(3)	180,000			180,000			4.28	%	4.77	%	7/1/2027
1010 Third Avenue and 77 West 55th Street	37,673			38,251			4.01	%	4.21	%	1/5/2028
10 Bank Street	32,252			32,920			4.23	%	4.36	%	6/1/2032
383 Main Avenue	30,000			30,000			4.44	%	4.55	%	6/30/2032
1333 Broadway	160,000			160,000			4.21	%	4.29	%	2/5/2033
Total mortgage debt	607,882			610,821
Senior unsecured notes:(4)
Series A	100,000			100,000			3.93	%	3.96	%	3/27/2025
Series B	125,000			125,000			4.09	%	4.12	%	3/27/2027
Series C	125,000			125,000			4.18	%	4.21	%	3/27/2030
Series D	115,000			115,000			4.08	%	4.11	%	1/22/2028
Series E	160,000			160,000			4.26	%	4.27	%	3/22/2030
Series F	175,000			175,000			4.44	%	4.45	%	3/22/2033
Series G	100,000			—			3.61	%	4.89	%	3/17/2032
Series H	75,000			—			3.73	%	5.00	%	3/17/2035
Unsecured revolving credit facility (4)	—			—			LIBOR plus 1.10%		2.03	%	8/29/2021
Unsecured term loan facility (4)	215,000			265,000			LIBOR plus 1.20%		3.77	%	3/19/2025
Unsecured term loan facility (4)	175,000			—			LIBOR plus 1.50%		2.99	%	12/31/2026
Total principal	1,972,882			1,675,821
Deferred financing costs, net	(9,289		)	(7,247		)
Total	$	1,963,593		$	1,668,574

______________

(1) The effective rate is the yield as of September 30, 2020 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 $16 million loan bearing interest at 6.25%.

(4)

At September 30, 2020, we were in compliance with all debt covenants.

Aggregate required principal payments

Aggregate required principal payments at September 30, 2020 are as follows (amounts in thousands):

Year	Amortization		Maturities		Total
2020	$	998	$	—	$	998
2021	4,090		—		4,090
2022	5,628		—		5,628
2023	7,876		—		7,876
2024	7,958		77,675		85,633
Thereafter	25,909		1,842,748		1,868,657
Total	$	52,459	$	1,920,423	$	1,972,882

Deferred financing costs, net

Deferred costs, net, consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):  

	September 30, 2020			December 31, 2019
Leasing costs	$	200,684		$	199,033
Acquired in-place lease value and deferred leasing costs	186,766			200,296
Acquired above-market leases	44,449			49,213
	431,899			448,542
Less: accumulated amortization	(226,802		)	(224,598		)
Total deferred costs, net, excluding net deferred financing costs	$	205,097		$	223,944

Deferred financing costs, net, consisted of the following at September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020			December 31, 2019
Financing costs	$	28,814		$	25,315
Less: accumulated amortization	(16,848		)	(13,863		)
Total deferred financing costs, net	$	11,966		$	11,452

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Accounts Payable and Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2020

Payables and Accruals [Abstract]

Accounts payable and accrued expenses

Accounts payable and accrued expenses consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020		December 31, 2019
Accrued capital expenditures	$	63,984	$	90,910
Accounts payable and accrued expenses	34,114		35,084
Interest rate swap agreements liability	10,222		13,330
Accrued interest payable	2,792		3,699
Due to affiliated companies	806		763
Total accounts payable and accrued expenses	$	111,918	$	143,786

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Financial Instruments and Fair Values (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Summary of the terms of the agreement and the fair value of derivative financial instrument

The table below summarizes the terms of agreements and the fair values of our derivative financial instruments as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):     

							September 30, 2020					December 31, 2019
Derivative	Notional Amount		Receive Rate	Pay Rate	Effective Date	Expiration Date	Asset		Liability			Asset		Liability
Interest rate swap	$	265,000	1 Month LIBOR	2.1485%	August 31, 2017	August 24, 2022	$	—	$	(10,222	)	$	—	$	(4,247	)
Interest rate swap	125,000		3 Month LIBOR	2.9580%	July 1, 2019	N/A	—		—			—		(9,083		)
							$	—	$	(10,222	)	$	—	$	(13,330	)

Effect of our derivative financial instruments designated as cash flow hedges on accumulated other comprehensive income (loss)

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, 2020 and 2019 (amounts in thousands):    

	Three Months Ended						Nine Months Ended
Effects of Cash Flow Hedges	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Amount of gain (loss) recognized in other comprehensive income (loss)	$	64		$	(6,256	)	$	(19,340	)	$	(25,992	)
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense	(2,873		)	(319		)	(5,986		)	(637		)

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, 2020 and 2019 (amounts in thousands):

	Three Months Ended						Nine Months Ended
Effects of Cash Flow Hedges	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Total interest (expense) presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded	$	(23,360	)	$	(19,426	)	$	(66,906	)	$	(60,712	)
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense	(2,873		)	(319		)	(5,986		)	(637		)

Summary carrying and estimated fair values of our financial instruments

The following tables summarize the carrying and estimated fair values of our financial instruments as of September 30, 2020 and December 31, 2019 (amounts in thousands):

	September 30, 2020
			Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3
Interest rate swaps included in accounts payable and accrued expenses	$	10,222	$	10,222	$	—	$	10,222	$	—
Mortgage notes payable	603,178		636,032		—		—		636,032
Senior unsecured notes - Series A, B, C, D, E, F, G and H	973,106		1,055,971		—		—		1,055,971
Unsecured term loan facilities	387,309		390,000		—		—		390,000

    

	December 31, 2019
			Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3
Interest rate swaps included in accounts payable and accrued expenses	$	13,330	$	13,330	$	—	$	13,330	$	—
Mortgage notes payable	605,542		629,609		—		—		629,609
Senior unsecured notes - Series A, B, C, D, E and F	798,392		843,394		—		—		843,394
Unsecured term loan facility	264,640		265,000		—		—		265,000

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Leases (Tables)

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Components of rental revenue

The components of rental revenue for the three and nine months ended September 30, 2020 and 2019 are as follows (amounts in thousands):

	Three Months Ended				Nine Months Ended
Rental revenue	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Fixed payments	$	122,976	$	129,030	$	375,882	$	380,647
Variable payments	16,933		21,195		50,139		54,066
Total rental revenue	$	139,909	$	150,225	$	426,021	$	434,713

Future contractual minimum lease payments on non-cancellable operating leases to be received (current year-to-date)

As of September 30, 2020, 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 2038 (amounts in thousands):

Remainder of 2020	$	126,997
2021	502,160
2022	484,131
2023	459,992
2024	423,039
Thereafter	2,139,096
	$	4,135,415

Future minimum lease payments to be paid

As of September 30, 2020, 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 2020	$	380
2021	1,518
2022	1,518
2023	1,518
2024	1,518
Thereafter	66,780
Total undiscounted cash flows	73,232
Present value discount	(44,078		)
Ground lease liabilities	$	29,154

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Equity (Tables)

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Net income attributable to common stockholders and the issuance of our Class A shares in exchange for the conversion of OP Units into common stock

The following is net income attributable to common stockholders and the issuance of our Class A shares in exchange for the conversion of OP Units into common stock (amounts in thousands):

	Three Months Ended					Nine Months Ended
	September 30, 2020			September 30, 2019		September 30, 2020			September 30, 2019
Net income (loss) attributable to common stockholders	$	(8,204	)	$	15,882	$	(16,502	)	$	32,646
Increase in additional paid-in capital for the conversion of OP Units into common stock	2,419			12,908		24,153			21,773
Change from net income (loss) attributable to common stockholders and transfers from non-controlling interests	$	(5,785	)	$	28,790	$	7,651		$	54,419

Schedule of Equity Securities Repurchased

The following table summarizes our purchases of equity securities each of the three months ended September 30, 2020 and the month of October 2020:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Approximate Dollar Value Available for Future Purchase (in thousands)
July 2020	656,318	$	6.72	656,318	$	380,982
August 2020	—	$	—	—	$	380,982
September 2020	477,620	$	6.14	477,620	$	378,050
October 2020	1,952,013	$	6.21	1,952,013	$	365,934

Summary of restricted stock and LTIP unit activity

The following is a summary of restricted stock and LTIP unit activity for the nine months ended September 30, 2020:

	Restricted Stock		LTIP Units		Weighted Average Grant Fair Value
Unvested balance at December 31, 2019	118,918		5,986,569		$	9.73
Vested	(57,599	)	(1,052,692	)	14.04
Granted	161,449		5,011,693		5.43
Forfeited or unearned	(1,136	)	(2,201,453	)	7.57
Unvested balance at September 30, 2020	221,632		7,744,117		$	6.93

Earnings per share

Earnings per share for the three and nine months ended September 30, 2020 and 2019 is computed as follows (amounts in thousands, except per share amounts):

	Three Months Ended						Nine Months Ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Numerator - Basic:
Net income (loss)	$	(12,269	)	$	26,784		$	(23,599	)	$	55,570
Private perpetual preferred unit distributions	(1,050		)	(234		)	(3,147		)	(702		)
Net income (loss) attributable to non-controlling interests	5,115			(10,668		)	10,244			(22,222		)
Earnings allocated to unvested shares	(24		)	(13		)	(60		)	(33		)
Net income (loss) attributable to common stockholders - basic	$	(8,228	)	$	15,869		$	(16,562	)	$	32,613
Numerator - Diluted:
Net income (loss)	$	(12,269	)	$	26,784		$	(23,599	)	$	55,570
Private perpetual preferred unit distributions	(1,050		)	(234		)	(3,147		)	(702		)
Earnings allocated to unvested shares	(24		)	(13		)	(60		)	(33		)
Net income (loss) attributable to common stockholders - diluted	$	(13,343	)	$	26,537		$	(26,806	)	$	54,835
Denominator:
Weighted average shares outstanding - basic	173,048			178,352			176,299			177,428
Operating partnership units	107,892			119,799			109,341			120,689
Effect of dilutive securities:
Stock-based compensation plans	—			—			—			—
Weighted average shares outstanding - diluted	280,940			298,151			285,640			298,117
Earnings per share:
Basic	$	(0.05	)	$	0.09		$	(0.09	)	$	0.18
Diluted	$	(0.05	)	$	0.09		$	(0.09	)	$	0.18

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Components of segment profit for each segment

The following tables provide components of segment profit for each segment for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):

	Three Months Ended September 30, 2020
	Real Estate			Observatory			Intersegment Elimination		Total
Revenues:
Rental revenue	$	139,909		$	—		$	—	$	139,909
Intercompany rental revenue	(2,233		)	—			2,233		—
Observatory revenue	—			4,419			—		4,419
Lease termination fees	331			—			—		331
Third-party management and other fees	283			—			—		283
Other revenue and fees	1,633			—			—		1,633
Total revenues	139,923			4,419			2,233		146,575
Operating expenses:
Property operating expenses	33,836			—			—		33,836
Intercompany rent expense	—			(2,233		)	2,233		—
Ground rent expense	2,331			—			—		2,331
General and administrative expenses	14,517			—			—		14,517
Observatory expenses	—			5,931			—		5,931
Real estate taxes	31,196			—			—		31,196
Impairment charge	2,103			—			—		2,103
Depreciation and amortization	44,679			54			—		44,733
Total operating expenses	128,662			3,752			2,233		134,647
Total operating income (loss)	11,261			667			—		11,928
Other income (expense):
Interest income	360			6			—		366
Interest expense	(23,360		)	—			—		(23,360		)
Loss on early extinguishment of debt	—			—			—		—
IPO litigation expense	(1,165		)	—			—		(1,165		)
Income (loss) before income taxes	(12,904		)	673			—		(12,231		)
Income tax (expense) benefit	(196		)	158			—		(38		)
Net income (loss)	$	(13,100	)	$	831		$	—	$	(12,269	)
Segment assets	$	3,771,476		$	239,238		$	—	$	4,010,714
Expenditures for segment assets	$	30,831		$	516		$	—	$	31,347

	Three Months Ended September 30, 2019
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	150,225		$	—		$	—		$	150,225
Intercompany rental revenue	23,242			—			(23,242		)	—
Observatory revenue	—			37,575			—			37,575
Lease termination fees	2,361			—			—			2,361
Third-party management and other fees	304			—			—			304
Other revenue and fees	2,408			—			—			2,408
Total revenues	178,540			37,575			(23,242		)	192,873
Operating expenses:
Property operating expenses	47,894			—			—			47,894
Intercompany rent expense	—			23,242			(23,242		)	—
Ground rent expense	2,331			—			—			2,331
General and administrative expenses	14,421			—			—			14,421
Observatory expenses	—			9,089			—			9,089
Real estate taxes	29,599			—			—			29,599
Depreciation and amortization	44,253			7			—			44,260
Total operating expenses	138,498			32,338			(23,242		)	147,594
Total operating income	40,042			5,237			—			45,279
Other income (expense):
Interest income	2,269			—			—			2,269
Interest expense	(19,426		)	—			—			(19,426		)
Income before income taxes	22,885			5,237			—			28,122
Income tax expense	(267		)	(1,071		)	—			(1,338		)
Net income	$	22,618		$	4,166		$	—		$	26,784
Segment assets	$	3,659,592		$	265,725		$	—		$	3,925,317
Expenditures for segment assets	$	42,901		$	18,375		$	—		$	61,276

	Nine Months Ended September 30, 2020
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	426,021		$	—		$	—		$	426,021
Intercompany rental revenue	13,356			—			(13,356		)	—
Observatory revenue	—			24,049			—			24,049
Lease termination fees	1,575			—			—			1,575
Third-party management and other fees	930			—			—			930
Other revenue and fees	5,254			—			—			5,254
Total revenues	447,136			24,049			(13,356		)	457,829
Operating expenses:
Property operating expenses	105,054			—			—			105,054
Intercompany rent expense	—			13,356			(13,356		)	—
Ground rent expense	6,994			—			—			6,994
General and administrative expenses	48,617			—			—			48,617
Observatory expenses	—			18,087			—			18,087
Real estate taxes	90,029			—			—			90,029
Impairment charges	6,204			—			—			6,204
Depreciation and amortization	143,522			87			—			143,609
Total operating expenses	400,420			31,530			(13,356		)	418,594
Total operating income (loss)	46,716			(7,481		)	—			39,235
Other income (expense):
Interest income	2,438			91			—			2,529
Interest expense	(66,906		)	—			—			(66,906		)
Loss on early extinguishment of debt	(86		)	—			—			(86		)
IPO litigation expense	(1,165		)	—			—			(1,165		)
Loss before income taxes	(19,003		)	(7,390		)	—			(26,393		)
Income tax (expense) benefit	(692		)	3,486			—			2,794
Net loss	$	(19,695	)	$	(3,904	)	$	—		$	(23,599	)
Expenditures for segment assets	$	77,503		$	2,748		$	—		$	80,251

	Nine Months Ended September 30, 2019
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	434,713		$	—		$	—		$	434,713
Intercompany rental revenue	58,754			—			(58,754		)	—
Observatory revenue	—			91,039			—			91,039
Lease termination fees	3,112			—			—			3,112
Third-party management and other fees	955			—			—			955
Other revenue and fees	6,591			—			—			6,591
Total revenues	504,125			91,039			(58,754		)	536,410
Operating expenses:
Property operating expenses	131,076			—			—			131,076
Intercompany rent expense	—			58,754			(58,754		)	—
Ground rent expense	6,994			—			—			6,994
General and administrative expenses	44,445			—			—			44,445
Observatory expenses	—			25,024			—			25,024
Real estate taxes	86,098			—			—			86,098
Depreciation and amortization	135,157			22			—			135,179
Total operating expenses	403,770			83,800			(58,754		)	428,816
Total operating income	100,355			7,239			—			107,594
Other income (expense):
Interest income	9,907			—			—			9,907
Interest expense	(60,712		)	—			—			(60,712		)
Income before income taxes	49,550			7,239			—			56,789
Income tax expense	(762		)	(457		)	—			(1,219		)
Net income	$	48,788		$	6,782		$	—		$	55,570
Expenditures for segment assets	$	134,865		$	46,703		$	—		$	181,568

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Description of Business and Organization (Details) ft² in Millions	9 Months Ended
	Sep. 30, 2020 ft² parcel office_and_property
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Area of real estate property (in square feet)	10.1
Office Building
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Area of real estate property (in square feet)	9.4
Number of properties | office_and_property	14
Office Building | Manhattan
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Area of real estate property (in square feet)	7.6
Number of properties | office_and_property	9
Office Building | Fairfield County, Connecticut and Westchester County, New York
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Area of real estate property (in square feet)	1.8
Number of properties | office_and_property	5
Long-term ground leasehold interests
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Number of properties | parcel	3
Retail Site | Manhattan and Westport, Connecticut
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Area of real estate property (in square feet)	0.2
Retail Site | Manhattan
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Area of real estate property (in square feet)	0.5
Number of properties | office_and_property	4
Retail Site | Westport, Connecticut
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Number of properties | office_and_property	2
Other Property | Stamford, Connecticut
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Area of real estate property (in square feet)	0.4
Empire State Realty Trust | Empire State Realty OP
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
OP units owned by the Company (as a percent)	60.00%

XML

Summary of Significant Accounting Policies (Details)	Sep. 30, 2020
Minimum
Accounting Policies [Line Items]
Observatory revenue realized during the first quarter, previous ten years (as a percent)	16.00%
Observatory revenue realized during the second quarter, previous ten years (as a percent)	26.00%
Observatory revenue realized during the third quarter, previous ten years (as a percent)	31.00%
Observatory revenue realized during the fourth quarter, previous ten years (as a percent)	23.00%
Maximum
Accounting Policies [Line Items]
Observatory revenue realized during the first quarter, previous ten years (as a percent)	18.00%
Observatory revenue realized during the second quarter, previous ten years (as a percent)	28.00%
Observatory revenue realized during the third quarter, previous ten years (as a percent)	33.00%
Observatory revenue realized during the fourth quarter, previous ten years (as a percent)	25.00%

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Deferred Costs, Acquired Lease Intangibles and Goodwill - Deferred Costs, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Leasing costs	$ 200,684	$ 199,033
Total deferred costs, gross amount	431,899	448,542
Less: accumulated amortization	(226,802)	(224,598)
Total deferred costs, net, excluding net deferred financing costs	205,097	223,944
Acquired in-place lease value and deferred leasing costs
Finite-Lived Intangible Assets [Line Items]
Acquired finite-lived intangible assets	186,766	200,296
Acquired above-market leases
Finite-Lived Intangible Assets [Line Items]
Acquired finite-lived intangible assets	$ 44,449	$ 49,213

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Deferred Costs, Acquired Lease Intangibles and Goodwill - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Jun. 30, 2020	Dec. 31, 2019
Deferred Costs [Line Items]
Amortization expense related to deferred leasing costs and acquired deferred leasing costs	$ 5,400	$ 6,200	$ 17,700	$ 18,300
Rental revenue related to the amortization of below-market leases, net of above-market leases	700	1,700	2,953	5,780
Goodwill	491,479		491,479			$ 491,479
Observatory
Deferred Costs [Line Items]
Goodwill	227,500		227,500
Real estate
Deferred Costs [Line Items]
Goodwill	264,000		264,000
Lease agreements
Deferred Costs [Line Items]
Amortization expense related to acquired lease intangibles	1,500	$ 2,400	5,900	$ 8,200
Unsecured revolving credit facility | Unsecured revolving credit facility
Deferred Costs [Line Items]
Net deferred financing costs	$ 2,700		$ 2,700			$ 4,200
Observatory
Deferred Costs [Line Items]
Fair value in excess of carrying value (less than) (as a percent)					5.00%

XML

Deferred Costs, Acquired Lease Intangibles and Goodwill - Amortizing Acquired Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Acquired below-market ground leases, net
Acquired below-market ground leases	$ 396,916	$ 396,916
Less: accumulated amortization	(50,223)	(44,350)
Acquired below-market ground leases, net	346,693	352,566
Acquired below-market leases, net
Acquired below-market leases	(82,891)	(100,472)
Less: accumulated amortization	49,486	60,793
Acquired below-market leases, net	$ (33,405)	$ (39,679)

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Debt - Long-Term Debt (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Mar. 17, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Unsecured revolving credit facility, net	$ 0		$ 0
Total principal	1,972,882,000
Deferred financing costs, net	(11,966,000)		(11,452,000)
Fixed rate mortgage debt
Debt Instrument [Line Items]
Fixed rate mortgage debt	607,882,000		610,821,000
Mortgages, senior notes, and unsecured term loan facilities, not including unsecured revolving credit facility
Debt Instrument [Line Items]
Total principal	1,972,882,000		1,675,821,000
Deferred financing costs, net	(9,289,000)		(7,247,000)
Total	1,963,593,000		1,668,574,000
Metro Center | Fixed rate mortgage debt
Debt Instrument [Line Items]
Fixed rate mortgage debt	$ 87,957,000		89,650,000
Stated Rate (as a percent)	3.59%
Effective Rate (as a percent)	3.67%
10 Union Square | Fixed rate mortgage debt
Debt Instrument [Line Items]
Fixed rate mortgage debt	$ 50,000,000		50,000,000
Stated Rate (as a percent)	3.70%
Effective Rate (as a percent)	3.97%
1542 Third Avenue | Fixed rate mortgage debt
Debt Instrument [Line Items]
Fixed rate mortgage debt	$ 30,000,000		30,000,000
Stated Rate (as a percent)	4.29%
Effective Rate (as a percent)	4.53%
First Stamford Place | Fixed rate mortgage debt
Debt Instrument [Line Items]
Fixed rate mortgage debt	$ 180,000,000		180,000,000
Stated Rate (as a percent)	4.28%
Effective Rate (as a percent)	4.77%
1010 Third Avenue and 77 West 55th Street | Fixed rate mortgage debt
Debt Instrument [Line Items]
Fixed rate mortgage debt	$ 37,673,000		38,251,000
Stated Rate (as a percent)	4.01%
Effective Rate (as a percent)	4.21%
10 Bank Street | Fixed rate mortgage debt
Debt Instrument [Line Items]
Fixed rate mortgage debt	$ 32,252,000		32,920,000
Stated Rate (as a percent)	4.23%
Effective Rate (as a percent)	4.36%
383 Main Avenue | Fixed rate mortgage debt
Debt Instrument [Line Items]
Fixed rate mortgage debt	$ 30,000,000		30,000,000
Stated Rate (as a percent)	4.44%
Effective Rate (as a percent)	4.55%
1333 Broadway | Fixed rate mortgage debt
Debt Instrument [Line Items]
Fixed rate mortgage debt	$ 160,000,000		160,000,000
Stated Rate (as a percent)	4.21%
Effective Rate (as a percent)	4.29%
Senior unsecured notes, Series A | Senior notes
Debt Instrument [Line Items]
Total	$ 100,000,000		100,000,000
Stated Rate (as a percent)	3.93%
Effective Rate (as a percent)	3.96%
Senior unsecured notes, Series B | Senior notes
Debt Instrument [Line Items]
Total	$ 125,000,000		125,000,000
Stated Rate (as a percent)	4.09%
Effective Rate (as a percent)	4.12%
Senior unsecured notes, Series C | Senior notes
Debt Instrument [Line Items]
Total	$ 125,000,000		125,000,000
Stated Rate (as a percent)	4.18%
Effective Rate (as a percent)	4.21%
Senior unsecured notes, Series D | Senior notes
Debt Instrument [Line Items]
Total	$ 115,000,000		115,000,000
Stated Rate (as a percent)	4.08%
Effective Rate (as a percent)	4.11%
Senior unsecured notes, Series E | Senior notes
Debt Instrument [Line Items]
Total	$ 160,000,000		160,000,000
Stated Rate (as a percent)	4.26%
Effective Rate (as a percent)	4.27%
Senior unsecured notes, Series F | Senior notes
Debt Instrument [Line Items]
Total	$ 175,000,000		175,000,000
Stated Rate (as a percent)	4.44%
Effective Rate (as a percent)	4.45%
Senior unsecured notes, Series G | Senior notes
Debt Instrument [Line Items]
Total	$ 100,000,000		0
Stated Rate (as a percent)	3.61%	3.61%
Effective Rate (as a percent)	4.89%
Face amount		$ 100,000,000
Senior unsecured notes, Series H | Senior notes
Debt Instrument [Line Items]
Total	$ 75,000,000		0
Stated Rate (as a percent)	3.73%	3.73%
Effective Rate (as a percent)	5.00%
Face amount		$ 75,000,000
Unsecured revolving credit facility | Revolving credit facility
Debt Instrument [Line Items]
Unsecured revolving credit facility, net	$ 0		0
Effective Rate (as a percent)	2.03%
Unsecured revolving credit facility | Revolving credit facility | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)	1.10%
Unsecured term loan facility | Revolving credit facility
Debt Instrument [Line Items]
Unsecured revolving credit facility, net	$ 215,000,000		265,000,000
Effective Rate (as a percent)	3.77%
Unsecured term loan facility | Revolving credit facility | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)	1.20%
Unsecured term loan facility | Revolving credit facility
Debt Instrument [Line Items]
Unsecured revolving credit facility, net	$ 175,000,000		$ 0
Effective Rate (as a percent)	2.99%
Unsecured term loan facility | Revolving credit facility | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)	1.50%
First Stamford Place - First Lien | Fixed rate mortgage debt
Debt Instrument [Line Items]
Stated Rate (as a percent)	4.09%
Face amount	$ 164,000,000
First Stamford Place - Second Lien | Fixed rate mortgage debt
Debt Instrument [Line Items]
Stated Rate (as a percent)	6.25%
Face amount	$ 16,000,000

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Debt - Aggregate Required Principal Payments (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Amortization
2020	$ 998
2021	4,090
2022	5,628
2023	7,876
2024	7,958
Thereafter	25,909
Total	52,459
Maturities
2020	0
2021	0
2022	0
2023	0
2024	77,675
Thereafter	1,842,748
Total	1,920,423
Total
2020	998
2021	4,090
2022	5,628
2023	7,876
2024	85,633
Thereafter	1,868,657
Total	$ 1,972,882

XML

Debt - Deferred Financing Costs, Net (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Debt Instrument [Line Items]
Financing costs	$ 28,814		$ 28,814		$ 25,315
Less: accumulated amortization	(16,848)		(16,848)		(13,863)
Total deferred financing costs, net	11,966		11,966		11,452
Amortization related to deferred financing costs	1,000	$ 900	3,000	$ 2,900
Unsecured term loan facility | Unsecured revolving credit facility
Debt Instrument [Line Items]
Net deferred financing costs	$ 2,700		$ 2,700		$ 4,200

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Debt - Unsecured Revolving Credit and Term Loan Facilities (Details)		12 Months Ended
	Mar. 19, 2020 USD ($) option	Dec. 31, 2021	Dec. 31, 2020	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Line of Credit Facility [Line Items]
Outstanding borrowings				$ 0	$ 0
Unsecured revolving credit facility and term loan | Unsecured term loan facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 1,315,000,000
Unsecured revolving credit facility higher borrowing capacity option	1,750,000,000
Unsecured revolving credit facility | Unsecured term loan facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 1,100,000,000
Outstanding borrowings				0	0
Number of options to extend maturity | option	2
Extension period	6 months
Term loan facility | Unsecured term loan facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 215,000,000.0
Outstanding borrowings				215,000,000	265,000,000
Unsecured term loan facility | Unsecured term loan facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	175,000,000
Unsecured revolving credit facility higher borrowing capacity option	$ 225,000,000
Outstanding borrowings				$ 175,000,000	$ 0
Minimum | Unsecured revolving credit facility | Unsecured term loan facility
Line of Credit Facility [Line Items]
Extension fee, as a percent of outstanding commitments under revolving credit facility	0.0625%
Maximum | Unsecured revolving credit facility | Unsecured term loan facility
Line of Credit Facility [Line Items]
Extension fee, as a percent of outstanding commitments under revolving credit facility	0.075%
Forecast | Unsecured term loan facility | Unsecured term loan facility
Line of Credit Facility [Line Items]
Prepayment fee, as a percent of principal amount prepaid		1.00%	2.00%

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Debt - Senior Unsecured Notes (Details) - Senior notes - USD ($)	Mar. 17, 2020	Sep. 30, 2020
Series G and Series H Senior Unsecured Notes
Debt Instrument [Line Items]
Face amount	$ 175,000,000
Issue price, as a percent of aggregate principal amount	100.00%
Senior unsecured notes, Series G
Debt Instrument [Line Items]
Face amount	$ 100,000,000
Stated rate (as a percent)	3.61%	3.61%
Senior unsecured notes, Series H
Debt Instrument [Line Items]
Face amount	$ 75,000,000
Stated rate (as a percent)	3.73%	3.73%

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Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Accrued capital expenditures	$ 63,984	$ 90,910
Accounts payable and accrued expenses	34,114	35,084
Interest rate swap agreements liability	10,222	13,330
Accrued interest payable	2,792	3,699
Due to affiliated companies	806	763
Total accounts payable and accrued expenses	$ 111,918	$ 143,786

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Financial Instruments and Fair Values - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap agreements liability	$ 10,222,000		$ 10,222,000		$ 13,330,000
Interest Rate Swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap agreements liability	10,300,000		10,300,000
Designated as Hedging Instrument | Cash Flow Hedging | Interest Rate Swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Aggregate notional value	265,000,000.0		265,000,000.0		390,000,000.0
Net unrealized gain (loss)	2,900,000	$ (5,900,000)	(13,400,000)	$ (25,400,000)
Net loss to be reclassified into interest expense within the next 12 months			(11,500,000)
Accounts payable and accrued expenses | Designated as Hedging Instrument | Cash Flow Hedging | Interest Rate Swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap agreements liability	10,200,000		10,200,000		$ 13,300,000
LIBOR | Designated as Hedging Instrument | Cash Flow Hedging | Interest Rate Swap, Three Month LIBOR, 2.9580%
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Notional amount	$ 125,000,000.0		125,000,000.0
Payment of termination settlement fee			$ 20,300,000

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Financial Instruments and Fair Values - Summary of the Terms of Agreements and the Fair Value of Derivative Financial Instruments (Details) - Designated as Hedging Instrument - Cash Flow Hedging - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Derivatives, Fair Value [Line Items]
Asset	$ 0	$ 0
Liability	(10,222,000)	(13,330,000)
LIBOR | Interest Rate Swap, One Month LIBOR, 2.1485%
Derivatives, Fair Value [Line Items]
Notional Amount	$ 265,000,000
Pay Rate	2.1485%
Asset	$ 0	0
Liability	(10,222,000)	(4,247,000)
LIBOR | Interest Rate Swap, Three Month LIBOR, 2.9580%
Derivatives, Fair Value [Line Items]
Notional Amount	$ 125,000,000.0
Pay Rate	2.958%
Asset	$ 0	0
Liability	$ 0	$ (9,083,000)

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Financial Instruments and Fair Values - Effect of Derivative Financial Instruments Designated as Cash Flow Hedges (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in other comprehensive income (loss)	$ 64	$ (6,256)	$ (19,340)	$ (25,992)
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense	(2,873)	(319)	(5,986)	(637)
Interest expense	(23,360)	(19,426)	(66,906)	(60,712)
Interest Rate Swap
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in other comprehensive income (loss)	64	(6,256)	(19,340)	(25,992)
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense	(2,873)	(319)	(5,986)	(637)
Reclassification out of Accumulated Other Comprehensive Income | Accumulated other comprehensive income (loss) | Interest Rate Swap
Derivative Instruments, Gain (Loss) [Line Items]
Interest expense	$ (2,873)	$ (319)	$ (5,986)	$ (637)

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Financial Instruments and Fair Values - Summary of the Carrying and Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swaps included in accounts payable and accrued expenses	$ 10,222	$ 13,330
Carrying Value | Mortgage notes payable
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	603,178	605,542
Carrying Value | Senior notes | Senior unsecured notes - Series A, B, C, D, E, F, G and H
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	973,106
Carrying Value | Senior notes | Senior unsecured notes - Series A, B, C, D, E and F
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value		798,392
Estimated Fair Value | Mortgage notes payable
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	636,032	629,609
Estimated Fair Value | Senior notes | Senior unsecured notes - Series A, B, C, D, E, F, G and H
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	1,055,971
Estimated Fair Value | Senior notes | Senior unsecured notes - Series A, B, C, D, E and F
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value		843,394
Level 1 | Estimated Fair Value | Mortgage notes payable
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	0	0
Level 1 | Estimated Fair Value | Senior notes | Senior unsecured notes - Series A, B, C, D, E, F, G and H
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	0
Level 1 | Estimated Fair Value | Senior notes | Senior unsecured notes - Series A, B, C, D, E and F
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value		0
Level 2 | Estimated Fair Value | Mortgage notes payable
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	0	0
Level 2 | Estimated Fair Value | Senior notes | Senior unsecured notes - Series A, B, C, D, E, F, G and H
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	0
Level 2 | Estimated Fair Value | Senior notes | Senior unsecured notes - Series A, B, C, D, E and F
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value		0
Level 3 | Estimated Fair Value | Mortgage notes payable
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	636,032	629,609
Level 3 | Estimated Fair Value | Senior notes | Senior unsecured notes - Series A, B, C, D, E, F, G and H
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	1,055,971
Level 3 | Estimated Fair Value | Senior notes | Senior unsecured notes - Series A, B, C, D, E and F
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value		843,394
Unsecured term loan facility | Carrying Value | Unsecured term loan facility
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	387,309	264,640
Unsecured term loan facility | Estimated Fair Value | Unsecured term loan facility
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	390,000	265,000
Unsecured term loan facility | Level 1 | Estimated Fair Value | Unsecured term loan facility
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	0	0
Unsecured term loan facility | Level 2 | Estimated Fair Value | Unsecured term loan facility
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	0	0
Unsecured term loan facility | Level 3 | Estimated Fair Value | Unsecured term loan facility
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, fair value	390,000	265,000
Interest Rate Swap
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swaps included in accounts payable and accrued expenses	10,300
Interest Rate Swap | Carrying Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swaps included in accounts payable and accrued expenses	10,222	13,330
Interest Rate Swap | Estimated Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swaps included in accounts payable and accrued expenses	10,222	13,330
Interest Rate Swap | Level 1 | Estimated Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swaps included in accounts payable and accrued expenses	0	0
Interest Rate Swap | Level 2 | Estimated Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swaps included in accounts payable and accrued expenses	10,222	13,330
Interest Rate Swap | Level 3 | Estimated Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swaps included in accounts payable and accrued expenses	$ 0	$ 0

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Leases - Narrative (Details) $ in Thousands	Sep. 30, 2020 USD ($) property	Dec. 31, 2019 USD ($)
Operating Leases [Line Items]
Right-of-use assets	$ 29,154	$ 29,307
Lease liabilities	$ 29,154	$ 29,307
Number of properties subject to ground leases | property	3
Weighted average discount rate	4.50%
Weighted average remaining lease term (in years)	49 years 7 months 6 days
Minimum
Operating Leases [Line Items]
Term of lease	1 year
Maximum
Operating Leases [Line Items]
Term of lease	21 years

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Leases - Components of Rental Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Leases [Abstract]
Fixed payments	$ 122,976	$ 129,030	$ 375,882	$ 380,647
Variable payments	16,933	21,195	50,139	54,066
Total rental revenue	$ 139,909	$ 150,225	$ 426,021	$ 434,713

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Leases - Future Contractual Minimum Lease Payments On Non-Cancellable Operating Leases To Be Received (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Leases [Abstract]
Remainder of 2020	$ 126,997
2021	502,160
2022	484,131
2023	459,992
2024	423,039
Thereafter	2,139,096
Total future minimum lease payments on non-cancellable operating leases to be received	$ 4,135,415

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Leases - Future Minimum Lease Payments on Ground Leases (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Leases [Abstract]
Remainder of 2020	$ 380
2021	1,518
2022	1,518
2023	1,518
2024	1,518
Thereafter	66,780
Total undiscounted cash flows	73,232
Present value discount	(44,078)
Ground lease liabilities	$ 29,154	$ 29,307

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Commitments and Contingencies - Legal Proceedings (Details) - New York State Supreme Court, New York County $ in Millions		1 Months Ended
	Aug. 26, 2020 USD ($)	Oct. 31, 2014 participant
Loss Contingencies [Line Items]
Number of plaintiffs opting out of settlement (participant) | participant		12
Amount awarded to claimants | $	$ 1.2
Interest period (in years)	7 years

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Commitments and Contingencies - Unfunded Capital Expenditures (Details) $ in Millions	Sep. 30, 2020 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Unfunded capital expenditures	$ 130.1

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Equity - Shares and Units (Details)	9 Months Ended
	Sep. 30, 2020 shares	May 16, 2019 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
OP Unit, redemption term for cash	1 year
OP Unit, exchange ratio to common stock	1
Dividends on common stock received until performance criteria met for LTIP units (as a percent)	10.00%
Dividends on common stock received after performance criteria met for LTIP units (as a percent)	90.00%
Dividends on common stock received in periods after performance criteria met for LTIP units (as a percent)	100.00%
OP units outstanding (in shares)	288,375,949
Empire State Realty Trust
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
OP units owned by the Company (in shares)	172,992,089
Other Partners, Certain Directors, Officers And Other Members Of Executive Management
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
OP units not owned by the Company (in shares)	115,383,860
Empire State Realty OP | Empire State Realty Trust
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
OP units owned by the Company (as a percent)	60.00%
Empire State Realty OP | Other Partners, Certain Directors, Officers And Other Members Of Executive Management
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
OP units not owned by the Company (as a percent)	40.00%
2019 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized under the plan (in shares)	11,000,000.0	11,000,000.0

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Equity - Change in Net Income Attributable to Common Shareholders (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Class of Stock [Line Items]
Net income (loss) attributable to common stockholders	$ (8,204)	$ 15,882	$ (16,502)	$ 32,646
Increase in additional paid-in capital for the conversion of OP Units into common stock	0	0	0	0
Change from net income (loss) attributable to common stockholders and transfers from non-controlling interests	(5,785)	28,790	7,651	54,419
Additional Paid-In Capital
Class of Stock [Line Items]
Increase in additional paid-in capital for the conversion of OP Units into common stock	$ 2,419	$ 12,908	$ 24,153	$ 21,773

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Equity - Equity Securities Repurchased (Details) - USD ($)	1 Months Ended
	Oct. 31, 2020	Sep. 30, 2020	Aug. 31, 2020	Jul. 31, 2020
Equity, Class of Treasury Stock [Line Items]
Stock repurchase authorized amount		$ 500,000,000
Total Number of Shares Purchased (in shares)		477,620	0	656,318
Average Price Paid per Share (in USD per share)		$ 6.14	$ 0	$ 6.72
Maximum Approximate Dollar Value Available for Future Purchase		$ 378,050,000	$ 380,982,000	$ 380,982,000
Subsequent Event
Equity, Class of Treasury Stock [Line Items]
Total Number of Shares Purchased (in shares)	1,952,013
Average Price Paid per Share (in USD per share)	$ 6.21
Maximum Approximate Dollar Value Available for Future Purchase	$ 365,934,000

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Equity - Private Perpetual Preferred Units (Details) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Preferred Units [Line Items]
Dividends per share (in USD per share)	$ 0	$ 0.105	$ 0.210	$ 0.315
Private Perpetual Preferred Units, Series 2019
Preferred Units [Line Items]
Private perpetual preferred units, issued (in shares)	4,664,038		4,664,038		4,610,383
Private perpetual preferred units, per unit liquidation preference (in USD per share)	$ 13.52		$ 13.52		$ 13.52
Cumulative preferential annual cash distributions (in USD per share)	$ 0.70		$ 0.70
Private Perpetual Preferred Units, Series 2014
Preferred Units [Line Items]
Private perpetual preferred units, issued (in shares)	1,560,360		1,560,360		1,560,360
Private perpetual preferred units issued during period (in shares)			1,560,360
Private perpetual preferred units, per unit liquidation preference (in USD per share)	$ 16.62		$ 16.62		$ 16.62
Dividends per share (in USD per share)			$ 0.60

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Equity - Dividends and Distributions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Equity [Abstract]
Dividends paid to common shareholders	$ 0	$ 18,900	$ 37,181	$ 56,098
Distributions paid to OP unitholders	0	13,000	25,000	39,600
Private perpetual preferred unit distributions	$ 1,100	$ 200	$ 3,147	$ 702

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Equity - Incentive and Share-Based Compensation (Details) $ / shares in Units, $ in Millions	1 Months Ended					3 Months Ended				6 Months Ended	9 Months Ended
	Aug. 31, 2020 USD ($) shares	Jun. 30, 2020 USD ($) shares	May 31, 2020 USD ($) vesting_installment shares	Mar. 31, 2020 USD ($) vesting_installment shares	Mar. 31, 2019 USD ($) vesting_installment shares	Sep. 30, 2020 USD ($) shares	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019 USD ($)	Oct. 31, 2019 USD ($) vesting_installment shares	Sep. 30, 2020 USD ($) $ / shares shares	Sep. 30, 2019 USD ($)	May 16, 2019 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Retirement age							65 years	60 years
Expected volatility rate look-back period (in years)											6 years
Weighted-average per unit or share fair value (in USD per share) | $ / shares											$ 5.43
Period of service, upon completion of which, grantee's LTIP unit and restricted stock awards will immediately vest (in years)											10 years
2019 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized under the plan (in shares)						11,000,000.0					11,000,000.0		11,000,000.0
Number of shares that remain available for future issuance (in shares)						8,500,000					8,500,000
Long-Term Incentive Plan Unit and Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of share-based awards granted in period | $											$ 28.1
Weighted-average per unit or share fair value (in USD per share) | $ / shares											$ 5.43
Dividend rate (as a percent)											3.70%
Risk-free interest rate, minimum (as a percent)											0.16%
Risk free interest rate, maximum (as a percent)											0.50%
Expected price volatility, minimum (as a percent)											19.00%
Expected price volatility, maximum (as a percent)											26.00%
Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Threshold of continuous service for retirement eligibility (in years)											10 years
2019 Plan Units | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			63,229	113,971
Fair value of share-based awards granted in period | $			$ 0.4	$ 2.3
Award vesting period (in years)				4 years
Number of vesting installments | vesting_installment				3
2019 Plan Units | Market Based Long-Term Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)				502,475
Fair value of share-based awards granted in period | $				$ 2.3
Award vesting period (in years)			3 years	3 years
Number of vesting installments | vesting_installment			2	2
2019 Plan Units | Time Restricted Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)				158,806
2013 Plan Units | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)					61,432
Fair value of share-based awards granted in period | $					$ 2.0
Award vesting period (in years)					4 years
Number of vesting installments | vesting_installment					3
2013 Plan Units | Market Based Long-Term Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)					113,383
Fair value of share-based awards granted in period | $					$ 0.9
Award vesting period (in years)					3 years
Number of vesting installments | vesting_installment					2
2013 Plan Units | Time Restricted Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)					69,358
Awards that Meet Age and Service Requirements for Vesting
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Noncash share-based compensation expense recognized | $						$ 0.4			$ 0.3		$ 2.3	$ 1.8
Unrecognized compensation expense | $						1.7					$ 1.7
Unrecognized compensation expense, period for recognition											2 years 3 months 18 days
Awards that Do Not Meet Age and Service Requirements for Vesting
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Noncash share-based compensation expense recognized | $						5.1			$ 3.4		$ 17.9	$ 13.6
Unrecognized compensation expense | $						$ 31.4					$ 31.4
Unrecognized compensation expense, period for recognition											2 years 3 months 18 days
Executive Officer | 2019 Plan Units | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			82,199	745,155
Fair value of share-based awards granted in period | $			$ 0.5	$ 5.6
Executive Officer | 2019 Plan Units | Market Based Long-Term Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)			116,927	3,358,767
Fair value of share-based awards granted in period | $			$ 0.5	$ 14.0
Reduction of grants (in shares)		666,933
Fair value of reduction of share-based awards granted in period | $		$ 2.8
Executive Officer | 2019 Plan Units, connected with bonus program | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)				624,380
Fair value of share-based awards granted in period | $				$ 4.4
Award vesting period (in years)											3 years
Vesting percentage of award face amount						125.00%					125.00%
Executive Officer | 2013 Plan Units | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)					461,693
Fair value of share-based awards granted in period | $					$ 6.4
Executive Officer | 2013 Plan Units | Market Based Long-Term Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)					1,806,520
Fair value of share-based awards granted in period | $					$ 12.8
Executive Officer | 2013 Plan Units, connected with bonus program | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)					334,952
Fair value of share-based awards granted in period | $					$ 4.6
Award vesting period (in years)											3 years
Vesting percentage of award face amount						125.00%					125.00%
Executive Officer | Vest immediately | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)				23,049	26,056
Executive Officer | Vest ratably over three years | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)				601,331	308,896
Award vesting period (in years)				3 years	3 years
Executive Officer | Vest in two equal annual installments | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of vesting installments | vesting_installment				2	2
Director | 2019 Plan Units | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	25,242		171,153							76,718
Fair value of share-based awards granted in period | $	$ 0.2		$ 1.1							$ 1.1
Award vesting period (in years)	3 years		3 years							3 years
Number of vesting installments | vesting_installment										2
Certain Other Employees | 2019 Plan Units | Market Based Long-Term Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Reduction of grants (in shares)		99,630
Fair value of reduction of share-based awards granted in period | $		$ 0.5
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Age of grantee at which LTIP unit and restricted stock awards immediately vest											60 years
Minimum | Long-Term Incentive Plan Unit and Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)											2 years
Minimum | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period (in years)											3 years
Minimum | 2019 Plan Units | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period (in years)			3 years
Number of vesting installments | vesting_installment			2
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Age of grantee at which LTIP unit and restricted stock awards immediately vest											65 years
Maximum | Long-Term Incentive Plan Unit and Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)											5 years 6 months
Maximum | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period (in years)											4 years
Maximum | 2019 Plan Units | Time Based Long-Tern Incentive Plan Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period (in years)			4 years
Number of vesting installments | vesting_installment			3

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Equity - Summary of Restricted Stock and LTIP Unit Activity (Details)	9 Months Ended
	Sep. 30, 2020 $ / shares shares
Weighted Average Grant Fair Value
Beginning balance, Unvested (in USD per share) | $ / shares	$ 9.73
Vested (in USD per share) | $ / shares	14.04
Granted (in USD per share) | $ / shares	5.43
Forfeited or unearned (in USD per share) | $ / shares	7.57
Ending balance, Unvested (in USD per share) | $ / shares	$ 6.93
Restricted Stock
Restricted Stock and LTIP Units
Beginning balance, Unvested (in shares)	118,918
Vested (in shares)	(57,599)
Granted (in shares)	161,449
Forfeited or unearned (in shares)	(1,136)
Ending balance, Unvested (in shares)	221,632
LTIP Units
Restricted Stock and LTIP Units
Beginning balance, Unvested (in shares)	5,986,569
Vested (in shares)	(1,052,692)
Granted (in shares)	5,011,693
Forfeited or unearned (in shares)	(2,201,453)
Ending balance, Unvested (in shares)	7,744,117

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Equity - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Numerator - Basic:
Net income (loss)	$ (12,269)	$ 26,784	$ (23,599)	$ 55,570
Private perpetual preferred unit distributions	(1,050)	(234)	(3,147)	(702)
Net income (loss) attributable to non-controlling interests	5,115	(10,668)	10,244	(22,222)
Earnings allocated to unvested shares	(24)	(13)	(60)	(33)
Net income (loss) attributable to common stockholders - basic	(8,228)	15,869	(16,562)	32,613
Numerator - Diluted:
Net income (loss)	(12,269)	26,784	(23,599)	55,570
Private perpetual preferred unit distributions	(1,050)	(234)	(3,147)	(702)
Earnings allocated to unvested shares	(24)	(13)	(60)	(33)
Net income (loss) attributable to common stockholders - diluted	$ (13,343)	$ 26,537	$ (26,806)	$ 54,835
Denominator:
Weighted average shares outstanding - basic (in shares)	173,048,000	178,352,000	176,299,000	177,428,000
Operating partnership units (in shares)	107,892,000	119,799,000	109,341,000	120,689,000
Effect of dilutive securities:
Stock-based compensation plans (in shares)	0	0	0	0
Weighted average shares outstanding - diluted (in shares)	280,940,000	298,151,000	285,640,000	298,117,000
Earnings per share:
Basic (in USD per share)	$ (0.05)	$ 0.09	$ (0.09)	$ 0.18
Diluted (in USD per share)	$ (0.05)	$ 0.09	$ (0.09)	$ 0.18
Antidilutive securities (in shares)	0	452,457	169,848	288,053

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Related Party Transactions (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($) ft² property	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) ft² property	Sep. 30, 2019 USD ($)
Related Party Transaction [Line Items]
Area of real estate property (in square feet) | ft²	10,100,000		10,100,000
Affiliated entities | Supervisory fee revenue
Related Party Transaction [Line Items]
Revenue from related parties	$ 0.2	$ 0.2	$ 0.7	$ 0.7
Affiliated entities | Property management fee revenue
Related Party Transaction [Line Items]
Revenue from related parties	0.1	0.1	0.2	0.2
Affiliated entities | Leased space rental
Related Party Transaction [Line Items]
Revenue from related parties	$ 0.1	$ 0.1	$ 0.2	$ 0.2
Number of properties | property	1		1
Notice period for lease cancellation			90 days
Undivided interest
Related Party Transaction [Line Items]
Area of real estate property (in square feet) | ft²	5,447		5,447
Chairman emeritus and employee | Leased space rental
Related Party Transaction [Line Items]
Percentage of lease space occupied by Chairman emeritus and employee (as a percent)			15.00%

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Segment Reporting - Narrative (Details) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) segment	Sep. 30, 2019 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | segment				2
Impairment charges	$ 2,103		$ 0	$ 6,204	$ 0
Real estate
Segment Reporting Information [Line Items]
Impairment charges	$ 2,100	$ 4,100		$ 6,200

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Segment Reporting - Components of Segment Profit for Each Segment (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Revenues:
Rental revenue	$ 139,909		$ 150,225	$ 426,021	$ 434,713
Intercompany rental revenue	0		0	0	0
Observatory revenue	4,419		37,575	24,049	91,039
Lease termination fees	331		2,361	1,575	3,112
Third-party management and other fees	283		304	930	955
Other revenue and fees	1,633		2,408	5,254	6,591
Total revenues	146,575		192,873	457,829	536,410
Operating expenses:
Property operating expenses	33,836		47,894	105,054	131,076
Intercompany rent expense	0		0	0	0
Ground rent expense	2,331		2,331	6,994	6,994
General and administrative expenses	14,517		14,421	48,617	44,445
Observatory expenses	5,931		9,089	18,087	25,024
Real estate taxes	31,196		29,599	90,029	86,098
Impairment charges	2,103		0	6,204	0
Depreciation and amortization	44,733		44,260	143,609	135,179
Total operating expenses	134,647		147,594	418,594	428,816
Total operating income	11,928		45,279	39,235	107,594
Other income (expense):
Interest income	366		2,269	2,529	9,907
Interest expense	(23,360)		(19,426)	(66,906)	(60,712)
Loss on early extinguishment of debt	0		0	(86)	0
IPO litigation expense	(1,165)		0	(1,165)	0
Income (loss) before income taxes	(12,231)		28,122	(26,393)	56,789
Income tax (expense) benefit	(38)		(1,338)	2,794	(1,219)
Net income (loss)	(12,269)		26,784	(23,599)	55,570
Segment assets	4,010,714		3,925,317	4,010,714	3,925,317	$ 3,931,834
Expenditures for segment assets	31,347		61,276	80,251	181,568
Intersegment Elimination
Revenues:
Intercompany rental revenue	2,233		(23,242)	(13,356)	(58,754)
Total revenues	2,233		(23,242)	(13,356)	(58,754)
Operating expenses:
Intercompany rent expense	2,233		(23,242)	(13,356)	(58,754)
General and administrative expenses	0		0	0	0
Impairment charges	0			0
Depreciation and amortization	0		0	0	0
Total operating expenses	2,233		(23,242)	(13,356)	(58,754)
Total operating income	0		0	0	0
Other income (expense):
Interest income	0		0	0	0
Interest expense	0		0	0	0
Loss on early extinguishment of debt	0			0
IPO litigation expense	0			0
Income (loss) before income taxes	0		0	0	0
Income tax (expense) benefit	0		0	0	0
Net income (loss)	0		0	0	0
Segment assets	0		0	0	0
Expenditures for segment assets	0		0	0	0
Real Estate
Operating expenses:
Impairment charges	2,100	$ 4,100		6,200
Real Estate | Operating Segments
Revenues:
Rental revenue	139,909		150,225	426,021	434,713
Intercompany rental revenue	(2,233)		23,242	13,356	58,754
Lease termination fees	331		2,361	1,575	3,112
Third-party management and other fees	283		304	930	955
Other revenue and fees	1,633		2,408	5,254	6,591
Total revenues	139,923		178,540	447,136	504,125
Operating expenses:
Property operating expenses	33,836		47,894	105,054	131,076
Ground rent expense	2,331		2,331	6,994	6,994
General and administrative expenses	14,517		14,421	48,617	44,445
Real estate taxes	31,196		29,599	90,029	86,098
Impairment charges	2,103			6,204
Depreciation and amortization	44,679		44,253	143,522	135,157
Total operating expenses	128,662		138,498	400,420	403,770
Total operating income	11,261		40,042	46,716	100,355
Other income (expense):
Interest income	360		2,269	2,438	9,907
Interest expense	(23,360)		(19,426)	(66,906)	(60,712)
Loss on early extinguishment of debt	0			(86)
IPO litigation expense	(1,165)			(1,165)
Income (loss) before income taxes	(12,904)		22,885	(19,003)	49,550
Income tax (expense) benefit	(196)		(267)	(692)	(762)
Net income (loss)	(13,100)		22,618	(19,695)	48,788
Segment assets	3,771,476		3,659,592	3,771,476	3,659,592
Expenditures for segment assets	30,831		42,901	77,503	134,865
Observatory | Operating Segments
Revenues:
Intercompany rental revenue	0		0	0	0
Observatory revenue	4,419		37,575	24,049	91,039
Total revenues	4,419		37,575	24,049	91,039
Operating expenses:
Intercompany rent expense	(2,233)		23,242	13,356	58,754
General and administrative expenses	0		0	0	0
Observatory expenses	5,931		9,089	18,087	25,024
Impairment charges	0			0
Depreciation and amortization	54		7	87	22
Total operating expenses	3,752		32,338	31,530	83,800
Total operating income	667		5,237	(7,481)	7,239
Other income (expense):
Interest income	6		0	91	0
Interest expense	0		0	0	0
Loss on early extinguishment of debt	0			0
IPO litigation expense	0			0
Income (loss) before income taxes	673		5,237	(7,390)	7,239
Income tax (expense) benefit	158		(1,071)	3,486	(457)
Net income (loss)	831		4,166	(3,904)	6,782
Segment assets	239,238		265,725	239,238	265,725
Expenditures for segment assets	$ 516		$ 18,375	$ 2,748	$ 46,703