Revenue Recognition

On January 1, 2018, we adopted ASC 606 which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires us to recognize for certain of our revenue sources the transfer of promised goods or services to customers in an amount that reflects the consideration we are entitled to in exchange for those goods or services. We adopted this standard effective January 1, 2018 using the modified retrospective method applied to all existing contracts not yet completed as of January 1, 2018 and recorded a $14,519,000 cumulative-effect adjustment to beginning accumulated deficit. The adoption of ASC 606 did not have a material impact on our consolidated financial statements.

Our revenues primarily consist of property rentals, tenant expense reimbursements, and fee and other income. We operate in two reportable segments: New York and Other, with a significant portion of our revenues included in the “New York” segment. We have the following revenue sources and revenue recognition policies:

•

Base rent is revenue arising from tenant leases. These rents are recognized over the non-cancelable term of the related leases on a straight-line basis which includes the effects of rent steps and rent abatements. We commence rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, in circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the term of the lease.


•	Hotel revenue arising from the operation of Hotel Pennsylvania consists of room revenue, food and beverage revenue, and banquet revenue. Room revenue is recognized when rooms are occupied. Food and beverage and banquet revenue are recognized when the services have been transferred.


•	Trade shows revenue arising from the operation of trade shows is primarily booth rentals. This revenue is recognized upon the occurrence of the trade shows.


•	Operating expense reimbursements is revenue arising from tenant leases which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the common areas of our properties. Revenue is recognized in the same period as the related expenses are incurred.


•	Tenant services is revenue arising from sub-metered electric, elevator, trash removal and other services provided to tenants at their request. This revenue is recognized as the services are transferred.

•

Fee and other income includes management, leasing and other revenue arising from contractual agreements with third parties or with partially owned entities, and includes Building Maintenance Service (“BMS”) cleaning, engineering and security services. This revenue is recognized as the services are transferred. Fee and other income also includes lease termination fee income which is recognized immediately if a tenant vacates or is recognized on a straight-line basis over the shortened remaining lease term.


4.	Revenue Recognition - continued

Below is a summary of our revenues by segment. Base rent, operating expense reimbursements and lease terminations represent revenues from leases and are recognized in accordance with ASC Topic 840, Leases. Revenues from Hotel Pennsylvania, trade shows, tenant services, BMS cleaning fees, management and leasing fees and other income represent revenues recognized in accordance with ASC 606. Additional financial information related to these reportable segments for the three and nine months ended September 30, 2018 and 2017 is set forth in Note 23 - Segment Information.



(Amounts in thousands)	For the Three Months Ended September 30, 2018								For the Three Months Ended September 30, 2017
	Total		New York		Other				Total		New York		Other
Base rent	$	403,029	$	339,939	$	63,090			$	398,734	$	339,717	$	59,017
Hotel Pennsylvania	26,088		26,088		—				25,421		25,421		—
Trade shows	8,443		—		8,443				7,907		—		7,907
Property rentals	437,560		366,027		71,533				432,062		365,138		66,924
Operating expense reimbursements	50,760		47,361		3,399				47,462		43,796		3,666
Tenant services	15,627		11,696		3,931				15,939		12,188		3,751
Tenant expense reimbursements	66,387		59,057		7,330				63,401		55,984		7,417
BMS cleaning fees	28,873		31,328		(2,455		)	⁽¹⁾	26,429		28,155		(1,726		)	⁽¹⁾
Management and leasing fees	4,734		4,439		295				2,330		2,101		229
Lease termination fees	356		58		298				991		984		7
Other income	4,138		1,537		2,601				3,542		1,247		2,295
Fee and other income	38,101		37,362		739				33,292		32,487		805
Total revenues	$	542,048	$	462,446	$	79,602			$	528,755	$	453,609	$	75,146



(Amounts in thousands)	For the Nine Months Ended September 30, 2018								For the Nine Months Ended September 30, 2017
	Total		New York		Other				Total		New York		Other
Base rent	$	1,215,520	$	1,027,697	$	187,823			$	1,175,692	$	999,875	$	175,817
Hotel Pennsylvania	67,842		67,842		—				63,047		63,047		—
Trade shows	38,903		—		38,903				36,858		—		36,858
Property rentals	1,322,265		1,095,539		226,726				1,275,597		1,062,922		212,675
Operating expense reimbursements	143,412		132,443		10,969				132,828		122,247		10,581
Tenant services	41,597		31,854		9,743				41,263		32,817		8,446
Tenant expense reimbursements	185,009		164,297		20,712				174,091		155,064		19,027
BMS cleaning fees	88,095		94,888		(6,793		)	⁽¹⁾	75,925		80,895		(4,970		)	⁽¹⁾
Management and leasing fees	10,205		9,384		821				7,382		6,593		789
Lease termination fees	1,505		766		739				5,947		5,773		174
Other income	13,224		4,608		8,616				8,958		5,463		3,495
Fee and other income	113,029		109,646		3,383				98,212		98,724		(512		)
Total revenues	$	1,620,303	$	1,369,482	$	250,821			$	1,547,900	$	1,316,710	$	231,190

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(1)	Represents the elimination of intercompany fees from the New York segment upon consolidation.