0001628280-23-037872.txt : 20231108 0001628280-23-037872.hdr.sgml : 20231108 20231108162245 ACCESSION NUMBER: 0001628280-23-037872 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 79 CONFORMED PERIOD OF REPORT: 20230930 FILED AS OF DATE: 20231108 DATE AS OF CHANGE: 20231108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Empire State Realty Trust, Inc. CENTRAL INDEX KEY: 0001541401 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 371645259 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36105 FILM NUMBER: 231388231 BUSINESS ADDRESS: STREET 1: 111 WEST 33RD STREET, 12TH FL CITY: NEW YORK STATE: NY ZIP: 10120 BUSINESS PHONE: 212-850-2600 MAIL ADDRESS: STREET 1: 111 WEST 33RD STREET, 12TH FL CITY: NEW YORK STATE: NY ZIP: 10120 10-Q 1 esrt-20230930.htm 10-Q esrt-20230930
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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, 2023
☐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 each classTrading SymbolName of each exchange on which registered
Class A Common Stock, par value $0.01 per shareESRTThe New York Stock Exchange
Class B Common Stock, par value $0.01 per shareN/AN/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, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth 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 November 1, 2023, there were 161,494,122 shares of Class A Common Stock, $0.01 par value per share, outstanding and 985,794 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, 2023
TABLE OF CONTENTSPAGE
PART 1.FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (unaudited)
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and 2022 (unaudited)
Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2023 and 2022 (unaudited)
Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2023 and 2022 (unaudited)
Notes to Condensed Consolidated Financial Statements (unaudited)
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
ITEM 4.CONTROLS AND PROCEDURES
PART II.OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
ITEM 1A.RISK FACTORS
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
ITEM 4.MINE SAFETY DISCLOSURES
ITEM 5.OTHER INFORMATION
ITEM 6.EXHIBITS
SIGNATURES

1









ITEM 1. FINANCIAL STATEMENTS
Empire State Realty Trust, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands, except per share amounts)
September 30, 2023December 31, 2022
ASSETS(unaudited)
Commercial real estate properties, at cost:
Land $366,364 $365,540 
Development costs8,178 8,166 
Building and improvements3,245,555 3,177,743 
3,620,097 3,551,449 
Less: accumulated depreciation(1,217,967)(1,137,267)
Commercial real estate properties, net2,402,130 2,414,182 
Assets held for sale— 35,538 
Cash and cash equivalents353,999 264,434 
Restricted cash66,954 50,244 
Tenant and other receivables37,651 24,102 
Deferred rent receivables254,233 240,188 
Prepaid expenses and other assets82,918 98,114 
Deferred costs, net175,488 187,570 
Acquired below-market ground leases, net323,199 329,073 
Right of use assets28,496 28,670 
Goodwill491,479 491,479 
Total assets$4,216,547 $4,163,594 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable, net$878,757 $883,705 
Senior unsecured notes, net973,819 973,659 
Unsecured term loan facilities, net389,158 388,773 
Unsecured revolving credit facility— — 
Accounts payable and accrued expenses83,299 80,729 
Acquired below-market leases, net14,703 17,849 
Ground lease liabilities28,496 28,670 
Deferred revenue and other liabilities75,688 76,091 
Tenants’ security deposits39,307 25,084 
Liabilities related to assets held for sale— 5,943 
Total liabilities2,483,227 2,480,503 
Commitments and contingencies
Equity:
Empire State Realty Trust, Inc. stockholders' equity:
Preferred stock, $0.01 par value, 50,000 shares authorized, none issued or outstanding
— — 
Class A common stock, $0.01 par value, 400,000 shares authorized, 161,347 and 160,139 shares issued and outstanding in 2023 and 2022, respectively
1,613 1,601 
Class B common stock, $0.01 par value, 50,000 shares authorized, 987 and 990 shares issued and outstanding in 2023 and 2022, respectively
10 10 
Additional paid-in capital1,058,537 1,055,184 
Accumulated other comprehensive income13,438 7,048 
Retained deficit(86,515)(109,468)
Total Empire State Realty Trust, Inc. stockholders' equity987,083 954,375 
Non-controlling interests in the Operating Partnership700,191 683,310 
Non-controlling interests in other partnerships16,106 15,466 
Private perpetual preferred units:
Private perpetual preferred units, $13.52 liquidation preference, 4,664 issued and outstanding in 2023 and 2022
21,936 21,936 
Private perpetual preferred units, $16.62 liquidation preference, 1,560 issued and outstanding in 2023 and 2022
8,004 8,004 
Total equity1,733,320 1,683,091 
Total liabilities and equity$4,216,547 $4,163,594 
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,
2023202220232022
Revenues:
Rental revenue$151,458 $148,290 $446,152 $445,143 
Observatory revenue37,562 33,051 93,149 73,660 
Lease termination fees— — — 20,032 
Third-party management and other fees268 389 1,076 1,025 
Other revenue and fees2,238 1,982 6,313 5,908 
Total revenues191,526 183,712 546,690 545,768 
Operating expenses:
Property operating expenses42,817 42,798 124,380 118,875 
Ground rent expenses2,331 2,331 6,994 6,994 
General and administrative expenses16,012 15,725 47,795 45,287 
Observatory expenses9,471 8,516 25,983 22,507 
Real estate taxes32,014 31,831 95,292 91,637 
Depreciation and amortization46,624 46,984 140,312 172,394 
Total operating expenses149,269 148,185 440,756 457,694 
Total operating income
42,257 35,527 105,934 88,074 
Other income (expense):
Interest income4,462 1,564 10,396 2,144 
Interest expense(25,382)(25,516)(76,091)(75,572)
Gain on disposition of property— — 29,261 27,170 
Income before income taxes21,337 11,575 69,500 41,816 
Income tax benefit (expense)(1,409)(1,457)(923)(224)
Net income19,928 10,118 68,577 41,592 
Net (income) loss attributable to non-controlling interests:
Non-controlling interests in the Operating Partnership(7,207)(3,560)(25,424)(14,865)
Non-controlling interests in other partnerships(111)49 (69)271 
Private perpetual preferred unit distributions(1,050)(1,050)(3,151)(3,151)
Net income attributable to common stockholders$11,560 $5,557 $39,933 $23,847 
Total weighted average shares:
Basic161,851 162,165 160,799 166,354 
Diluted266,073 267,121 265,269 270,966 
Earnings per share attributable to common stockholders:
Basic$0.07 $0.03 $0.25 $0.14 
Diluted$0.07 $0.03 $0.25 $0.14 
Dividends per share$0.035 $0.035 $0.105 $0.105 

The accompanying notes are an integral part of these consolidated financial statements
3








Empire State Realty Trust, Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
(amounts in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net income$19,928 $10,118 $68,577 $41,592 
Other comprehensive income:
Unrealized gain on valuation of interest rate swap agreements9,525 19,588 16,058 39,407 
Less: amount reclassified into interest expense(2,275)1,392 (5,429)7,428 
     Other comprehensive income7,250 20,980 10,629 46,835 
Comprehensive income27,178 31,098 79,206 88,427 
Net income attributable to non-controlling interests and private perpetual preferred unitholders(8,368)(4,561)(28,644)(17,746)
Other comprehensive income attributable to non-controlling interests(3,106)(8,518)(4,369)(19,400)
Comprehensive income attributable to common stockholders$15,704 $18,019 $46,193 $51,281 

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, 2023 and 2022
(unaudited) (amounts in thousands)
Number of Class A Common SharesClass A Common StockNumber of Class B Common SharesClass B Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive IncomeRetained Earnings (Deficit)Total Stockholders' EquityNon-controlling InterestsPrivate Perpetual Preferred UnitsTotal Equity
Balance at June 30, 2023159,843 $1,598 988 $10 $1,047,459 $9,275 $(92,392)$965,950 $715,722 $29,940 $1,711,612 
Issuance of Class A shares— — — — — — — — — — — 
Conversion of operating partnership units and Class B shares to Class A shares1,506 15 (1)— 10,629 19 — 10,663 (10,663)— — 
Contributions from consolidated joint ventures— — — — — — — — 75 — 75 
Repurchases of common shares— — — — — — — — — — — 
Equity compensation: 
LTIP units— — — — — — — — 4,540 — 4,540 
Restricted stock, net of forfeitures(2)— — — 449 — — 449 — — 449 
Dividends and distributions— — — — — — (5,683)(5,683)(3,801)(1,050)(10,534)
Net income— — — — — — 11,560 11,560 7,318 1,050 19,928 
Other comprehensive income — — — — — 4,144 — 4,144 3,106 — 7,250 
Balance at September 30, 2023161,347 $1,613 987 $10 $1,058,537 $13,438 $(86,515)$987,083 $716,297 $29,940 $1,733,320 
Number of Class A Common SharesClass A Common StockNumber of Class B Common SharesClass B Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossRetained Earnings (Deficit)Total Stockholders' EquityNon-controlling InterestsPrivate Perpetual Preferred UnitsTotal Equity
Balance at June 30, 2022162,690 $1,626 994 $10 $1,076,854 $(5,827)$(114,860)$957,803 $678,350 $29,940 $1,666,093 
Issuance of Class A shares— — — — — — — — — — — 
Conversion of operating partnership units and Class B shares to Class A shares461 5 — — (5)39 — 39 (39)— — 
Repurchases of common shares(2,567)(25)— — (16,845)— (1,235)(18,105)— — (18,105)
Equity compensation:
LTIP units— — — — — — — — 5,057 — 5,057 
Restricted stock, net of forfeitures(8)— — — 317 — — 317 — — 317 
Dividends and distributions— — — — — — (5,694)(5,694)(3,887)(1,050)(10,631)
Net income (loss)— — — — — — 5,557 5,557 3,511 1,050 10,118 
Other comprehensive income— — — — — 12,462 — 12,462 8,518 — 20,980 
Balance at September 30, 2022160,576 $1,606 994 $10 $1,060,321 $6,674 $(116,232)$952,379 $691,510 $29,940 $1,673,829 



5









Empire State Realty Trust, Inc.
Condensed Consolidated Statements of Stockholders' Equity
For The Nine Months Ended September 30, 2023 and 2022
(unaudited)
(amounts in thousands)
Number of Class A Common SharesClass A Common StockNumber of Class B Common SharesClass B Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive IncomeRetained Earnings (Deficit)Total Stockholders' EquityNon-controlling InterestsPrivate Perpetual Preferred UnitsTotal Equity
Balance at December 31, 2022160,139 $1,601 990 $10 $1,055,184 $7,048 $(109,468)$954,375 $698,776 $29,940 $1,683,091 
Conversion of operating partnership units and Class B shares to Class A shares3,041 30 (3)— 15,522 130 — 15,682 (15,682)— — 
Repurchases of common shares(2,151)(21)— — (13,084)— — (13,105)— — (13,105)
Contributions from consolidated joint ventures— — — — — — — — 187 — 187 
Equity compensation:
LTIP units— — — — — — — — 13,814 — 13,814 
Restricted stock, net of forfeitures318 3 — — 915 — — 918 — — 918 
Dividends and distributions— — — — — — (16,980)(16,980)(10,660)(3,151)(30,791)
Net income— — — — — — 39,933 39,933 25,493 3,151 68,577 
Other comprehensive income— — — — — 6,260 — 6,260 4,369 — 10,629 
Balance at September 30, 2023161,347 $1,613 987 $10 $1,058,537 $13,438 $(86,515)$987,083 $716,297 $29,940 $1,733,320 


Number of Class A Common SharesClass A Common StockNumber of Class B Common SharesClass B Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained Earnings (Deficit)Total Stockholders' EquityNon-controlling InterestsPrivate Perpetual Preferred UnitsTotal Equity
Balance at December 31, 2021169,221 $1,692 996 $10 $1,150,884 $(20,848)$(133,610)$998,128 $656,264 $29,940 $1,684,332 
Conversion of operating partnership units and Class B shares to Class A shares1,601 16 (2)— 2,281 87 — 2,384 (2,384)— — 
Repurchases of common shares(10,433)(104)— — (93,416)— 10,975 (82,545)— — (82,545)
Contributions from consolidated joint ventures— — — — — — — — 224 — 224 
Equity compensation:
LTIP units— — — — — — — — 15,025 — 15,025 
Restricted stock, net of forfeitures187 2 — — 572 — — 574 — — 574 
Dividends and distributions— — — — — — (17,444)(17,444)(11,613)(3,151)(32,208)
Net income (loss)— — — — — — 23,847 23,847 14,594 3,151 41,592 
Other comprehensive income— — — — — 27,435 — 27,435 19,400 — 46,835 
Balance at September 30, 2022160,576 $1,606 994 $10 $1,060,321 $6,674 $(116,232)$952,379 $691,510 $29,940 $1,673,829 

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,
20232022
Cash Flows From Operating Activities
Net income$68,577 $41,592 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization140,312 172,394 
Gain on disposition of property(29,261)(27,170)
Amortization of non-cash items within interest expense6,804 7,514 
Amortization of acquired above- and below-market leases, net(1,932)(4,136)
Amortization of acquired below-market ground leases5,873 5,873 
Straight-lining of rental revenue(17,430)(18,533)
Equity based compensation14,732 15,599 
Increase (decrease) in cash flows due to changes in operating assets and liabilities:
Security deposits14,293 (1,198)
Tenant and other receivables(13,459)(11,707)
Deferred leasing costs(11,838)(31,983)
Prepaid expenses and other assets23,569 23,630 
Accounts payable and accrued expenses(6,055)2,511 
Deferred revenue and other liabilities1,863 (401)
Net cash provided by operating activities196,048 173,985 
Cash Flows From Investing Activities
Acquisition of real estate property(26,910)— 
Net proceeds from disposition of property88,910 — 
Development costs— (31)
Additions to building and improvements(101,379)(89,085)
Net cash used in investing activities(39,379)(89,116)

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,
20232022
Cash Flows From Financing Activities
Repayment of mortgage notes payable(6,685)(5,163)
Contributions from consolidated joint ventures187 224 
Repurchases of common shares(13,105)(82,545)
Private perpetual preferred unit distributions(3,151)(3,151)
Dividends paid to common stockholders(16,980)(17,444)
Distributions paid to non-controlling interests in the operating partnership(10,660)(11,613)
Net cash used in financing activities (50,394)(119,692)
Net increase (decrease) in cash and cash equivalents and restricted cash106,275 (34,823)
Cash and cash equivalents and restricted cash—beginning of period314,678 474,638 
Cash and cash equivalents and restricted cash—end of period$420,953 $439,815 
Reconciliation of Cash and Cash Equivalents and Restricted Cash:
Cash and cash equivalents at beginning of period$264,434 $423,695 
Restricted cash at beginning of period50,244 50,943 
Cash and cash equivalents and restricted cash at beginning of period$314,678 $474,638 
Cash and cash equivalents at end of period$353,999 $387,248 
Restricted cash at end of period66,954 52,567 
Cash and cash equivalents and restricted cash at end of period$420,953 $439,815 
Supplemental disclosures of cash flow information:
Cash paid for interest$69,739 $67,673 
Cash paid for income taxes$578 $188 
Non-cash investing and financing activities:
Building and improvements included in accounts payable and accrued expenses$44,099 $55,320 
Write-off of fully depreciated assets23,058 55,585 
Derivative instruments at fair values included in prepaid expenses and other assets25,578 18,457 
Conversion of operating partnership units and Class B shares to Class A shares15,682 2,384 
Disposal of land in connection with foreclosure— 1,680 
Extinguishment of debt in connection with property disposition— 30,000 

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 New York City-focused real estate investment trust ("REIT"), with four revenue drivers: a portfolio of modernized, amenitized and well-located office, retail, and multifamily assets. ESRT’s flagship Empire State Building – the “World’s Most Famous Building” – also includes our Observatory Experience, Tripadvisor’s #1 United States destination attraction in its 2023 Travelers’ Choice Best of the Best Awards for two consecutive years.

    As of September 30, 2023, ESRT’s portfolio is comprised of approximately 8.6 million rentable square feet of office space, 0.7 million rentable square feet of retail space and 727 residential units. Our office portfolio included 11 properties (including three long-term ground leasehold interests) encompassing approximately 8.6 million rentable square feet. Nine of these office properties are located in midtown Manhattan and encompass approximately 7.6 million rentable square feet, including the Empire State Building. The remaining two office properties encompass approximately 1.1 million rentable square feet and are located in Stamford, Connecticut, with immediate access to mass transportation. Additionally, we have entitled land adjacent to one of the Stamford office properties, that can support the development of an approximately 0.4 million rentable square foot office building and garage. Our retail portfolio included approximately 0.7 million rentable square feet of retail space, predominantly located in Manhattan. Our multifamily portfolio included 727 residential units in New York City, 721 of which are located in Manhattan.

     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 (the "IPO"). 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, 2023, we owned approximately 59.9% 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 subject to tax as a REIT for U.S. 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 "Summary of Significant Accounting Policies" section in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”).

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. 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, 2022 contained in our Annual Report. Our observatory business is subject to seasonality based on tourism trends and the weather. Pre-pandemic, 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. Our multifamily business experiences some seasonality based on general market trends in New York City – the winter months
9








(November through January) are slower in terms of leasing activity. We seek to mitigate this by staggering lease terms such that lease expirations are matched with seasonal demand. We do not consider the balance of our business to be subject to material seasonal fluctuations.
    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 VIE of ESRT. As the Operating Partnership is already consolidated in the financial statements of ESRT, the identification of this entity as a VIE has no impact on our consolidated financial statements. At December 31, 2022, the Operating Partnership was the primary beneficiary of a variable interest in the intermediary entity which held title to 298 Mulberry, the multifamily asset acquired in December 2022. The intermediary entity was utilized to execute a like-kind exchange and subsequent to March 31, 2023, the like-kind exchange was completed and the Operating Partnership took title to 298 Mulberry. Therefore, the Operating Partnership had no VIEs at September 30, 2023.

    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.

    
3. Acquisitions and Dispositions

Property Acquisitions
On September 14, 2023, we closed on the acquisition of a retail property in Williamsburg, Brooklyn, located on the corner of North 6th Street and Wythe Avenue for a purchase price of $26.4 million. The property has three retail tenants and six residential units, and was fully leased as of September 30, 2023. The transaction was executed in accordance with a "1031 Exchange" under Section 1031 of the Internal Revenue Code of 1986, as amended. The purchase price is the fair value at the date of acquisition.

10








The following table summarizes properties acquired during the nine and twelve months ended September 30, 2023 and December 31, 2022, respectively (amounts in thousands):
Intangibles
PropertyDate AcquiredLandBuilding and ImprovementsAssetsLiabilitiesTotal*
Williamsburg Retail, Brooklyn9/14/2023$4,851 $20,936 $1,573 $(300)$27,060 
298 Mulberry Street, Manhattan12/20/2022$40,935 $69,508 $5,300 $(150)$115,593 
*Includes total capitalized transaction costs of $1.4 million.


Property Dispositions
The following table summarizes properties disposed of during the nine and twelve months ended September 30, 2023 and December 31, 2022, respectively (amounts in thousands):
PropertyDate of DisposalSales PriceGain on Disposition
500 Mamaroneck Avenue, Harrison, New York*4/5/2023$53,000 $13,572 
69-97 and 103-107 Main Street, Westport, Connecticut2/1/2023$40,000 $15,689 
10 Bank Street, White Plains, New York12/7/2022$42,000 $6,818 
383 Main Avenue, Norwalk, Connecticut**4/1/2022$30,000 $27,170 
*The gain is net of approximately $2.0 million of estimated post-closing obligations related to contaminated soil remediation costs and our commitment to reimburse the buyer for a delay in rent commencement from a tenant impacted by the soil remediation efforts. Should this rent commencement be delayed beyond our current estimate, our maximum exposure to reimburse the buyer for such a delay, as limited by amounts held in escrow, is an incremental post-closing obligation of $3.6 million.
**We transferred the property, which was encumbered by a $30.0 million mortgage, back to the lender in a consensual foreclosure and recognized a non-cash gain upon the disposition.
4. Deferred Costs, Acquired Lease Intangibles and Goodwill
    Deferred costs, net, consisted of the following as of September 30, 2023 and December 31, 2022 (amounts in thousands):  
September 30, 2023December 31, 2022
Leasing costs$222,272 $218,707 
Acquired in-place lease value and deferred leasing costs158,518 160,683 
Acquired above-market leases24,430 27,833 
405,220 407,223 
Less: accumulated amortization(233,132)(223,246)
Total deferred costs, net, excluding net deferred financing costs$172,088 $183,977 
    At September 30, 2023 and December 31, 2022, $3.4 million and $5.0 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 sheets.
    Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $5.8 million and $17.7 million for the three and nine months ended September 30, 2023, respectively, and $5.6 million and $19.8 million for the three and nine months ended September 30, 2022, respectively. Amortization expense related to acquired lease intangibles was $1.5 million and $6.1 million for the three and nine months ended September 30, 2023, respectively, and $2.2 million and $10.6 million for the three and nine months ended September 30, 2022, respectively.
    Amortizing acquired intangible assets and liabilities consisted of the following as of September 30, 2023 and December 31, 2022 (amounts in thousands):
September 30, 2023December 31, 2022
Acquired below-market ground leases$396,916 $396,916 
Less: accumulated amortization(73,717)(67,843)
Acquired below-market ground leases, net$323,199 $329,073 
11








September 30, 2023December 31, 2022
Acquired below-market leases$(55,186)$(64,656)
Less: accumulated amortization40,483 46,807 
Acquired below-market leases, net$(14,703)$(17,849)
    Rental revenue related to the amortization of below-market leases, net of above-market leases, was $0.6 million and $1.9 million for the three and nine months ended September 30, 2023, respectively, and $0.7 million and $4.1 million for the three and nine months ended September 30, 2022, respectively.
     As of September 30, 2023 and December 31, 2022, 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 reportable segment.
    From the quarter ended June 30, 2020 through our annual goodwill testing in October 2022, we bypassed the optional qualitative goodwill impairment assessment and proceeded directly to a quantitative assessment of the observatory reportable segment and engaged a third-party valuation consulting firm to perform the valuation process. This was done in response to the temporary closure of our observatory due to the COVID-19 pandemic and subsequent slow increase in visitors due to continued pandemic-related restrictions impacting tourism and international travel. The quantitative analysis used a combination of the discounted cash flow method (a form of the income approach) utilizing Level 3 unobservable inputs and the guideline company method (a form of the market approach). Significant assumptions under the former included revenue and cost projections, weighted average cost of capital, long-term growth rate and income tax considerations while the latter included guideline company enterprise values, revenue multiples and control premium rates. Our methodology to review goodwill impairment, which included a significant amount of judgment and estimates, provided a reasonable basis to determine whether impairment had occurred. Each quantitative analysis performed concluded the fair value of the reporting unit exceeds its carrying value. Subsequent to our last annual goodwill impairment test, we have performed quarterly qualitative assessments and have not identified any events which would indicate, on a more likely than not basis, that the goodwill allocated to the reporting unit was impaired. 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.


5. Debt
    Debt consisted of the following as of September 30, 2023 and December 31, 2022 (amounts in thousands):
12








Principal BalanceAs of September 30, 2023
September 30, 2023December 31, 2022Stated
Rate
Effective
Rate(1)
Maturity
Date(2)
Mortgage debt
Metro Center$80,710 $82,596 3.59 %3.67 %11/5/2024
10 Union Square50,000 50,000 3.70 %3.97 %4/1/2026
1542 Third Avenue30,000 30,000 4.29 %4.53 %5/1/2027
First Stamford Place(3)
176,359 178,823 4.28 %4.73 %7/1/2027
1010 Third Avenue and 77 West 55th Street35,179 35,831 4.01 %4.21 %1/5/2028
250 West 57th Street180,000 180,000 2.83 %3.21 %12/1/2030
1333 Broadway160,000 160,000 4.21 %4.29 %2/5/2033
345 East 94th Street - Series A43,600 43,600 
70.0% of SOFR plus 0.95%
3.56 %11/1/2030
345 East 94th Street - Series B7,378 7,865 
SOFR plus 2.24%
3.56 %11/1/2030
561 10th Avenue - Series A114,500 114,500 
70.0% of SOFR plus 1.07%
3.85 %11/1/2033
561 10th Avenue - Series B16,219 17,415 
SOFR plus 2.45%
3.85 %11/1/2033
Total mortgage debt893,945 900,630 
Senior unsecured notes:(4)
   Series A100,000 100,000 3.93 %3.96 %3/27/2025
   Series B125,000 125,000 4.09 %4.12 %3/27/2027
   Series C125,000 125,000 4.18 %4.21 %3/27/2030
   Series D115,000 115,000 4.08 %4.11 %1/22/2028
   Series E160,000 160,000 4.26 %4.27 %3/22/2030
   Series F175,000 175,000 4.44 %4.45 %3/22/2033
   Series G100,000 100,000 3.61 %4.89 %3/17/2032
   Series H75,000 75,000 3.73 %5.00 %3/17/2035
Unsecured term loan facility (4)
215,000 215,000 
SOFR plus 1.20%
4.22 %3/19/2025
Unsecured revolving credit facility (4)
— — 
SOFR plus 1.30%
— 3/31/2025
Unsecured term loan facility (4)
175,000 175,000 
SOFR plus 1.50%
4.51 %12/31/2026
Total principal2,258,945 2,265,630 
Deferred financing costs, net(10,052)(11,748)
Unamortized debt discount(7,159)(7,745)
Total$2,241,734 $2,246,137 
______________

(1)The effective rate is the yield as of September 30, 2023 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 $12.4 million loan bearing interest at 6.25%.
(4)At September 30, 2023, we were in compliance with all debt covenants.




Principal Payments
    Aggregate required principal payments at September 30, 2023 are as follows (amounts in thousands):

13








YearAmortizationMaturitiesTotal
2023$1,947 $— $1,947 
20248,861 77,675 86,536 
20256,893 315,000 321,893 
20267,330 225,000 232,330 
20276,461 319,000 325,461 
Thereafter22,079 1,268,699