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 generally 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.


3.	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 years ended December 31, 2018, 2017 and 2016 is set forth in Note 25 - Segment Information.



(Amounts in thousands)	For the Year Ended December 31, 2018
	Total		New York		Other
Base rent	$	1,623,122	$	1,371,182	$	251,940
Hotel Pennsylvania	94,399		94,399		—
Trade shows	42,684		—		42,684
Property rentals	1,760,205		1,465,581		294,624
Operating expense reimbursements	193,207		177,044		16,163
Tenant services	53,921		41,351		12,570
Tenant expense reimbursements	247,128		218,395		28,733
BMS cleaning fees	120,357		129,088		(8,731		)	⁽¹⁾
Management and leasing fees	13,324		12,203		1,121
Lease termination fees	2,144		858		1,286
Other income	20,562		9,911		10,651
Fee and other income	156,387		152,060		4,327
Total revenues	$	2,163,720	$	1,836,036	$	327,684



(Amounts in thousands)	For the Year Ended December 31, 2017
	Total		New York		Other
Base rent	$	1,583,443	$	1,347,270	$	236,173
Hotel Pennsylvania	89,302		89,302		—
Trade shows	42,207		—		42,207
Property rentals	1,714,952		1,436,572		278,380
Operating expense reimbursements	179,381		165,347		14,034
Tenant services	54,043		42,273		11,770
Tenant expense reimbursements	233,424		207,620		25,804
BMS cleaning fees	104,143		110,986		(6,843		)	⁽¹⁾
Management and leasing fees	10,087		8,599		1,488
Lease termination fees	8,171		7,955		216
Other income	13,349		7,575		5,774
Fee and other income	135,750		135,115		635
Total revenues	$	2,084,126	$	1,779,307	$	304,819

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See notes on the following page.


3.	Revenue Recognition - continued



(Amounts in thousands)	For the Year Ended December 31, 2016
	Total		New York		Other
Base rent	$	1,538,605	$	1,313,611	$	224,994
Hotel Pennsylvania	80,785		80,785		—
Trade shows	42,703		—		42,703
Property rentals	1,662,093		1,394,396		267,697
Operating expense reimbursements	166,103		154,734		11,369
Tenant services	55,460		44,304		11,156
Tenant expense reimbursements	221,563		199,038		22,525
BMS cleaning fees	93,425		97,612		(4,187		)	⁽¹⁾
Management and leasing fees	8,243		7,531		712
Lease termination fees	8,770		7,705		1,065
Other income	9,648		7,092		2,556
Fee and other income	120,086		119,940		146
Total revenues	$	2,003,742	$	1,713,374	$	290,368

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