UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 15, 2014

 

 

EMPIRE STATE REALTY TRUST, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Maryland   001-36105   37-1645259
(State or other Jurisdiction
of Incorporation)
 

(Commission

File Number)

  (I.R.S. Employer
Identification No.)

 

 

 

One Grand Central Place

60 East 42 nd Street

New York, New York

  10165
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (212) 687-8700

n/a

(Former name or former address, if changed from last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

The information regarding the registration rights agreement contained in Item 2.01 of this Current Report on Form 8–K is incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

On July 15, 2014, Empire State Realty Trust, Inc. (“ESRT”) announced that its operating partnership, Empire State Realty OP, L.P. (“ESRO”), completed the acquisition of the ground and operating leases at 112 West 34 th Street from 112 West 34 th Street Associates L.L.C. and 112 West 34 th Street Company L.L.C. (the “112 Property”), and the ground lease at 1400 Broadway from 1400 Broadway Associates L.L.C. (the “1400 Property”). ESRT’s subsidiary previously served as supervisor of each of the selling entities.

The 112 Property was acquired for approximately $423.6 million, or approximately $570 per square foot, consisting of $87.7 million by assumption of existing mortgage debt, $106.9 million in cash and $229.0 million in shares of ESRT Class A and Class B common stock and ESRO Series PR operating partnership units. In connection with this transaction and in accordance with the applicable option agreements, ESRT issued 1,217,685 shares of Class A common stock and 77,495 shares of Class B common stock each at a share price of $16.65, and ESRO issued 12,457,379 Series PR operating partnership units at a unit price of $16.65.

The 1400 Property was acquired for approximately $310.0 million, or approximately $346 per square foot, consisting of $80.0 million by assumption of existing mortgage debt, $79.7 million in cash and $150.3 million in shares of ESRT Class A and Class B common stock and ESRO Series PR operating partnership units. In connection with this transaction and in accordance with the applicable option agreements, ESRT issued 1,338,488 shares of Class A common stock and 32,452 shares of Class B common stock each at a share price of $16.65, and ESRO issued 7,658,516 Series PR operating partnership units at a unit price of $16.65.

In connection with the closing of the transactions, ESRT entered into a registration rights agreement covering the ESRT Class A and Class B common stock and ESRO Series PR operating partnership units issued to investors in entities that owned the 112 Property and 1400 Property. Under the registration rights agreement, subject to certain limitations, not later than 12 months from the beginning of the first full calendar month following the completion of ESRT’s initial public offering, we will file one or more registration statements, which we refer to as the resale shelf registration statements, covering the resale of all shares of ESRT Class A common stock issued in connection with the transactions, and all shares of ESRT Class A common stock that may be issued upon redemption of ESRO Series PR operating partnership units or upon conversion of ESRT Class B common stock, or collectively the registrable shares. We may, at our option, satisfy our obligation to prepare and file a resale shelf registration statement with respect to shares of ESRT Class A common stock issued upon redemption of ESRO Series PR operating partnership units or issued upon conversion of shares of ESRO Class B common stock by filing one or more issuer shelf registration statements which, collectively with the resale shelf registration statements, we refer to as the shelf registration statements, registering the issuance by us of shares of ESRT Class A common stock under the Securities Act of 1933, as amended (the “Securities Act”). We have agreed to use our commercially reasonable efforts to cause each shelf registration statement to be declared effective within 120 days of filing. Additionally, the registrable shares held by the Malkin family pursuant to the registration rights agreement are subject to the demand and piggy-back rights that the Malkin family has under the registration

 

2


rights agreement ESRT entered into in connection with the consolidation and initial public offering of ESRT’s Class A common stock. The foregoing does not purport to be a complete description of the terms of the registration rights agreement and is qualified in its entirety by the registration rights agreement, which is attached as exhibit 10.4 to this Current Report on Form 8-K and is incorporated herein by reference.

A copy of the press release issued by ESRT announcing such acquisition is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

Item 3.02 Unregistered Sales of Equity Securities.

The information contained in Item 2.01 of this Current Report on Form 8–K is incorporated herein by reference. The issuance of the ESRT Class A and Class B common stock and ESRO Series PR operating partnership units described above were effected in reliance upon an exemption from registration provided by Section 4(2) under the Securities Act and pursuant to Rule 506 of Regulation D of the Securities Act. The ESRO Series PR operating partnership units are redeemable for shares of ESRT Class A common stock in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of Empire State Realty OP, L.P.

Item 9.01. Financial Statements and Exhibits.

 

(a) Financial Statements of Businesses Acquired.

The Statements of Revenue and Certain Expenses, in accordance with Rule 3-14 of Regulation S-X, of 112 West 34 th Street and 1400 Broadway for the three months ended March 31, 2014 (unaudited) and for the years ended December 31, 2013, 2012 and 2011 (audited).

 

(b) Pro Forma Financial Information

Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2014 (unaudited) and Pro Forma Condensed Consolidated Statements of Income for the three months ended March 31, 2014 (unaudited) and for the year ended December 31, 2013 (unaudited).

 

(d) Exhibits

 

Exhibit
No.
   Description
10.1    Amended and Restated Option Agreement among,  inter alios , Empire State Realty OP, L.P., Empire State Realty Trust, Inc. and 112 West 34th Street Associates L.L.C., dated September 16, 2013, incorporated by reference to Exhibit 10.17 to Amendment No. 8 to the Registrant’s Form S-11 (Registration No. 333-179485), filed with the SEC on September 27, 2013.
10.2    Amended and Restated Option Agreement among, inter alios , Empire State Realty OP, L.P., Empire State Realty Trust, Inc. and 112 West 34th Street Company L.L.C., dated September 16, 2013, incorporated by reference to Exhibit 10.18 to Amendment No. 8 to the Registrant’s Form S-11 (Registration No. 333-179485), filed with the SEC on September 27, 2013.
10.3    Amended and Restated Option Agreement among, inter alios , Empire State Realty OP, L.P., Empire State Realty Trust, Inc. and 1400 Broadway Associates L.L.C. dated September 16, 2013, incorporated by reference to Exhibit 10.19 to Amendment No. 8 to the Registrant’s Form S-11 (Registration No. 333-179485), filed with the SEC on September 27, 2013.

 

3


10.4*    Registration Rights Agreement among Empire State Realty Trust, Inc. and the persons named therein, dated July 15, 2014.
23.1*    Consent of Ernst & Young LLP
99.1*    Press Release dated July 16, 2014

Notes:

 

* Filed herewith.

 

4


REPORT OF INDEPENDENT AUDITORS

 

To: The Board of Directors and the Stockholders of Empire State Realty Trust, Inc.

We have audited the accompanying statements of revenues and certain expenses of 112 West 34th Street (the “Property”) for each of the three years in the period ended December 31, 2013, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the statements of revenues and certain expenses in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statements of revenues and certain expenses that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the statements of revenues and certain expenses based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statements of revenues and certain expenses are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statements of revenues and certain expenses. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the statements of revenues and certain expenses, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Property’s preparation and fair presentation of the statements of revenues and certain expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statements of revenues and certain expenses.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the statements of revenues and certain expenses referred to above present fairly, in all material respects, the revenues and certain expenses described in Note 2 of 112 West 34th Street for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.

Basis of Accounting

As described in Note 2 to the financial statements, the statements of revenues and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Form 8-K of Empire State Realty Trust, Inc., and are not intended to be a complete presentation of the Property’s revenue and expenses. Our opinion is not modified with respect to this matter.

 

  /s/ Ernst & Young LLP
  New York, New York
  July 21, 2014

 

5


112 West 34th Street

Statements of Revenues and Certain Expenses

(In Thousands)

 

     Three Months
Ended March 31,
     Year Ended December 31,  
     2014      2013      2012      2011  
     (unaudited)                       

Revenue:

           

Rental revenue

   $ 5,615       $ 22,750       $ 23,068       $ 21,728   

Tenant expense reimbursements

     970         3,866         3,609         3,647   

Other property income

     7         412         483         205   
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue - Total

     6,592         27,028         27,160         25,580   
  

 

 

    

 

 

    

 

 

    

 

 

 

Certain expenses:

           

Rental operating

     750         4,014         3,576         2,914   

Utilities

     459         1,751         1,969         2,072   

Repairs and maintenance

     192         1,221         1,222         781   

Insurance

     99         366         279         232   

Real estate taxes

     1,279         4,980         4,708         4,403   

Rent expense

     187         747         747         747   

Management fees

     90         368         297         347   

General and administrative

     144         454         406         200   
  

 

 

    

 

 

    

 

 

    

 

 

 

Certain expenses - Total

     3,200         13,901         13,204         11,696   
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenues in excess of certain expenses

   $ 3,392       $ 13,127       $ 13,956       $ 13,884   
  

 

 

    

 

 

    

 

 

    

 

 

 

See accompanying notes.

 

6


112 West 34th Street

Notes to Statements of Revenues and Certain Expenses

For the Three Months ended March 31, 2014 (unaudited)

and for the Years ended December 31, 2013, 2012 and 2011

(In Thousands)

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

The accompanying statements of revenues and certain expenses include the results of operations of the ground leasehold of 112 West 34th Street and the fee ownership of 122 West 34 Street (collectively the “Property”). The Property consists of 650,769 square feet (unaudited) of office space and 92,455 square feet (unaudited) of retail space and is located at 112-122 West 34th Street between Avenue of the Americas and Seventh Avenue. The Property’s prior owners were supervised by ESRT Management TRS, L.L.C. (“ESRT Management”), successor by merger to Malkin Holdings LLC (“Malkin Holdings”).

On July 15, 2014, Empire State Realty OP, L.P., (“ESRO”) the operating partnership of Empire State Realty Trust, Inc., (“ESRT”) acquired the Property from 112 West 34th Street Company L.L.C. and 112 West 34th Street Associates, L.L.C. for approximately $423.6 million, or approximately $570 per square foot, consisting of $87.7 million by assumption of existing mortgage debt, $106.9 million in cash and $229.0 million in shares of Class A and Class B common stock and Series PR OP units. In connection with this transaction, ESRT and ESRO respectively issued 1,217,685 shares of Class A common stock and 77,945 shares of Class B common stock at a share price of $16.65 and 12,457,379 Series PR OP Units at a unit price of $16.65.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying statements of revenues and certain expenses have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the statements are not representative of the actual results of operations for the periods presented, as revenues and certain expenses, which may not be directly attributable to the revenues and expenses to be incurred in the future operations of the Property, have been excluded. Such excluded items include interest income, depreciation and amortization, interest expense and supervisory and related party fees.

Accounting Estimates

The preparation of the statements of revenues and certain expenses in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that in certain circumstances may affect the reported revenues and certain expenses. Actual results could materially differ from these estimates.

Interim Statement

The statement of revenues and certain expenses for the three months ended March 31, 2014 is unaudited. However, in the opinion of management of ESRT, all significant adjustments necessary for a fair presentation of the statement for the interim period has been included. The results of operations for the interim period is not necessarily indicative of the results to be expected for the full year of the operation of the Property.

Revenue Recognition

Rental revenue includes base rents that each tenant pays in accordance with the terms of its lease and is reported on a straight-line basis over the non-cancellable term of the lease which includes the effects of rent steps and rent abatements. Rental revenue recognition commences when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, many of the leases contain fixed percentage increases over the base rent to cover escalations.

 

7


In addition to base rent, tenants also generally will pay their pro rata share of increases in real estate taxes and operating expenses for the building over a base year. In some leases, in lieu of paying additional rent based upon increases in building operating expenses, the tenant will pay additional rent based upon increases in the Consumer Price Index over the index value in effect during a base year. Rental revenue from month-to-month leases or leases with no scheduled rent increases or other adjustments is recognized on a monthly basis when earned.

Lease cancellation fees are recognized when the fees are determinable and collectability is reasonably assured, the Property has no continuing obligation to provide services to such former tenants and the payment is not subject to any conditions that must be met or waived. No lease cancellation fees were recognized for any of the periods presented.

Bad Debt Expense

Bad debt expense (recovery), which is included in rental operating expenses in the accompanying statements of revenues and certain expenses, was ($5), $877, $510 and $291 for the three months ended March 31, 2014, and the years ended December 31, 2013, 2012 and 2011, respectively.

NOTE 3. MINIMUM FUTURE LEASE RENTALS

The Property leases various office spaces to tenants over terms ranging from five to seventeen 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 reimbursements. Operating expense reimbursements are reflected in tenant expense reimbursements in the accompanying statements of revenues and certain expenses.

At December 31, 2013, future contractual minimum lease payments to be received on non-cancellable operating leases are as follows (in thousands):

 

2014

   $ 21,964   

2015

     21,036   

2016

     15,083   

2017

     9,526   

2018

     5,098   

Thereafter

     32,174   
  

 

 

 

Total

   $ 104,881   
  

 

 

 

NOTE 4. LEASE COMMITMENTS

The Property is subject to a non-cancellable ground lease. Minimum rent is expensed on a straight-line basis over the non-cancellable term of the lease which has been extended through May 31, 2077.

 

8


At December 31, 2013, future minimum lease payments to be paid over the non-cancellable term of the lease are as follows (in thousands):

 

2014

   $ 783   

2015

     735   

2016

     735   

2017

     735   

2018

     735   

Thereafter

     42,936   
  

 

 

 

Total

   $ 46,659   
  

 

 

 

NOTE 5. CONCENTRATION OF CREDIT RISK

Two tenants comprised approximately 36% of rental revenue for the year ended December 31, 2011. Three tenants comprised approximately 44% of rental revenue for the year ended December 31, 2012. Three tenants comprised approximately 45% of rental revenue for the year ended December 31, 2013. Three tenants comprised approximately 46% of rental revenue for the three months ended March 31, 2014.

NOTE 6. RELATED PARTY TRANSACTIONS

The Property’s insurance policies are purchased by an entity affiliated with ESRT Management, a related party. Insurance costs are allocated to the Property and other affiliated entities managed by ESRT Management based on the respective property’s square footage.

The following expenditures are not reflected in the statements of revenues and certain expenses, but represent transactions between the Property and its supervisor, ESRT Management.

Supervisory and other professional services are provided to the Property by ESRT Management. Beneficial and management interests in the Property are held directly or indirectly by one or more persons with investment and/or management interests in (a) Malkin Holdings prior to October 7, 2013 and (b) the parent of ESRT Management thereafter and/or family members of such persons.

For administration and investment of the Property’s supervisory account, the Supervisor has earned since 1979 a service fee of 10% of the account interest.

NOTE 7. COMMITMENTS AND CONTINGENCIES

The Property entered into contracts with third parties for building repairs, alterations, or replacements. Some of these contracts may span more than one year in duration. The total amount of these commitments has not been determined.

The Property is not presently involved in any material litigation, nor, to our knowledge is any material litigation threatened against the Property, other than routine litigation arising in the ordinary course of business such as disputes with tenants. The Property believes that the costs and related liabilities, if any, which may result from such actions will not materially affect the Property’s operating results.

NOTE 8. SUBSEQUENT EVENTS

Management of ESRT has evaluated events and transactions for potential recognition or disclosure through July 21, 2014, the date the statements of revenues and certain expenses were available to be issued.

 

9


REPORT OF INDEPENDENT AUDITORS

 

To: The Board of Directors and the Stockholders of Empire State Realty Trust, Inc.

We have audited the accompanying statements of revenues and certain expenses of 1400 Broadway (the “Property”) for each of the three years in the period ended December 31, 2013, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the statements of revenues and certain expenses in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statements of revenues and certain expenses that are free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the statements of revenues and certain expenses based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statements of revenues and certain expenses are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statements of revenues and certain expenses. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the statements of revenues and certain expenses, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Property’s preparation and fair presentation of the statements of revenues and certain expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statements of revenues and certain expenses.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the statements of revenues and certain expenses referred to above present fairly, in all material respects, the revenues and certain expenses described in Note 2 of 1400 Broadway for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.

Basis of Accounting

As described in Note 2 to the financial statements, the statements of revenues and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Form 8-K of Empire State Realty Trust, Inc., and are not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified with respect to this matter.

 

  /s/ Ernst & Young LLP
  New York, New York
  July 21, 2014

 

10


1400 Broadway

Statements of Revenues and Certain Expenses

(In Thousands)

 

     Three Months
Ended March 31,
     Year Ended December 31,  
     2014      2013      2012      2011  
     (unaudited)                       

Revenue:

           

Rental revenue

   $ 7,924       $ 27,503       $ 24,695       $ 24,342   

Tenant expense reimbursements

     1,157         4,205         4,002         3,910   

Other property income

     38         398         952         256   
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue - Total

     9,119         32,106         29,649         28,508   
  

 

 

    

 

 

    

 

 

    

 

 

 

Certain expenses:

           

Rental operating

     888         3,464         3,745         4,466   

Utilities

     988         2,813         2,867         2,869   

Repairs and maintenance

     456         1,625         2,008         2,995   

Insurance

     101         400         388         356   

Real estate taxes

     1,263         4,923         4,760         4,654   

Rent expense

     172         719         719         719   

Management fees

     69         295         281         274   

General and administrative

     91         150         370         159   
  

 

 

    

 

 

    

 

 

    

 

 

 

Certain expenses - Total

     4,028         14,389         15,138         16,492   
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenues in excess of certain expenses

   $ 5,091       $ 17,717       $ 14,511       $ 12,016   
  

 

 

    

 

 

    

 

 

    

 

 

 

See accompanying notes.

 

11


1400 Broadway

Notes to Statements of Revenues and Certain Expenses

Three Months ended March 31, 2014 (unaudited)

and years ended December 31, 2013, 2012 and 2011

(In Thousands)

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

The accompanying statements of revenues and certain expenses include the operations of the ground leasehold of 1400 Broadway (the “Property”). The Property consists of 880,131 square feet (unaudited) of office space and 19,815 square feet (unaudited) of retail space and is located at 1400 Broadway, New York, NY. The Property’s prior owners were supervised by ESRT Management TRS, L.L.C. (“ESRT Management”), successor by merger to Malkin Holdings LLC (“Malkin Holdings”).

On July 15, 2014, Empire State Realty OP, L.P. (“ESRO”), the operating partnership of Empire State Realty Trust, Inc. (“ESRT”), acquired the Property from 1400 Broadway Associates L.L.C. for approximately $310.0 million, or approximately $346 per square foot, consisting of $80.0 million by assumption of existing mortgage debt, $79.7 million in cash and $150.3 million in shares of Class A and Class B common stock and Series PR OP units. In connection with this transaction, ESRT and ESRO respectively issued 1,338,488 shares of Class A common stock and 32,452 shares of Class B common stock at a share price of $16.65 and 7,658,516 Series PR OP Units at a unit price of $16.65.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying statements of revenues and certain expenses have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the statements are not representative of the actual results of operations for the periods presented, as revenues and certain expenses, which may not be directly attributable to the revenues and expenses to be incurred in the future operations of the Property, have been excluded. Such excluded items include interest income, depreciation and amortization, interest expense and supervisory and related party fees.

Accounting Estimates

The preparation of the statements of revenues and certain expenses in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that in certain circumstances may affect the reported revenues and certain expenses. Actual results could materially differ from these estimates.

Interim Statement

The statement of revenues and certain expenses for the three months ended March 31, 2014 is unaudited. However, in the opinion of management of ESRT, all significant adjustments necessary for a fair presentation of the statement for the interim period has been included. The results of operations for the interim period is not necessarily indicative of the results to be expected for the full year of the operation of the Property.

Revenue Recognition

Rental revenue includes base rents that each tenant pays in accordance with the terms of its lease and is reported on a straight-line basis over the non-cancellable term of the lease which includes the effects of rent steps and rent abatements. Rental revenue recognition commences when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use. In addition, many of the leases contain fixed percentage increases over the base rent to cover escalations.

 

12


In addition to base rent, tenants also generally will pay their pro rata share of increases in real estate taxes and operating expenses for the building over a base year. In some leases, in lieu of paying additional rent based upon increases in building operating expenses, the tenant will pay additional rent based upon increases in the Consumer Price Index over the index value in effect during a base year. Rental revenue from month-to-month leases or leases with no scheduled rent increases or other adjustments is recognized on a monthly basis when earned.

Lease cancellation fees are recognized when the fees are determinable and collectability is reasonably assured, the Property has no continuing obligation to provide services to such former tenants and the payment is not subject to any conditions that must be met or waived.

Bad Debt Expense

Bad debt expense, which is included in rental operating expenses in the accompanying statements of revenues and certain expenses was $172, $439, $265 and $426 for the three months ended March 31, 2014 and years ended December 31, 2013, 2012 and 2011, respectively.

NOTE 3. MINIMUM FUTURE LEASE RENTALS

The Property leases various office spaces to tenants over terms ranging from five to fifteen 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 reimbursements. Operating expense reimbursements are reflected in tenant expense reimbursements in the accompanying statements of revenues and certain expenses.

At December 31, 2013, future contractual minimum lease payments to be received on non-cancellable operating leases are as follows (in thousands):

 

2014

   $ 27,006   

2015

     27,214   

2016

     25,615   

2017

     24,141   

2018

     20,126   

Thereafter

     105,134   
  

 

 

 

Total

   $ 229,236   
  

 

 

 

NOTE 4. LEASE COMMITMENTS

The Property is subject to a non-cancellable ground lease. Minimum rent is expensed on a straight-line basis over the non-cancellable term of the lease which has been extended through December 31, 2039. The Property has the option to extend the lease through 2063.

At December 31, 2013, future minimum lease payments to be paid over the non-cancellable term of the lease are as follows (in thousands):

 

2014

   $ 675   

2015

     675   

2016

     675   

2017

     675   

2018

     675   

Thereafter

     14,175   
  

 

 

 

Total

   $ 17,550   
  

 

 

 

 

13


NOTE 5. CONCENTRATION OF CREDIT RISK

Four tenants comprised approximately 24%, 28% and 26% of rental revenue for the years ended December 31, 2013, 2012 and 2011, respectively. Four tenants comprised approximately 18% of rental revenue for the three months ended March 31, 2014.

NOTE 6. RELATED PARTY TRANSACTIONS

The Property’s insurance policies are purchased by an entity affiliated with ESRT Management, a related party. Insurance costs are allocated to the Property and other affiliated entities managed by ESRT Management based on the respective property’s square footage.

The following expenditures are not reflected in the statements of revenues and certain expenses, but represent transactions between the Property and its supervisor, ESRT Management, a related party.

Supervisory and other professional services are provided to the Property by ESRT Management. Beneficial and management interests in the Property are held directly or indirectly by one or more persons with investment and/or management interests in (a) Malkin Holdings prior to October 7, 2013 and (b) the parent of ESRT Management thereafter and/or family members of such persons.

For administration and investment of the Property’s supervisory account, the Supervisor has earned since 1978 a service fee of 10% of the account interest.

NOTE 7. COMMITMENTS AND CONTINGENCIES

The Property entered into contracts with third parties for building repairs, alterations, or replacements. Some of these contracts may span more than one year in duration. The total amount of these commitments has not been determined.

The Property is not presently involved in any material litigation, nor, to our knowledge is any material litigation threatened against the Property, other than routine litigation arising in the ordinary course of business such as disputes with tenants. The Property believes that the costs and related liabilities, if any, which may result from such actions will not materially affect the Property’s operating results.

NOTE 8. SUBSEQUENT EVENTS

Management of ESRT has evaluated events and transactions for potential recognition or disclosure through July 21, 2014, the date the statements of revenues and certain expenses were available to be issued.

 

14


Empire State Realty Trust, Inc.

Unaudited Pro Forma Condensed Consolidated Financial Statements

Empire State Realty Trust, Inc., together with Empire State Realty OP, L.P. (the “Company”), made the following acquisitions since January 1, 2014:

 

Property Name

   Date of Acquisition    Purchase Price  

112 West 34th Street

   July 15, 2014    $ 423.6 million   

1400 Broadway

   July 15, 2014    $ 310.0 million   

The unaudited pro forma condensed consolidated balance sheet assumes that the 2014 acquisitions occurred on March 31, 2014, and the unaudited pro forma condensed consolidated statements of income assume that the 2014 acquisitions occurred on January 1, 2013.

In management’s opinion, all adjustments necessary to reflect the effects of these acquisitions have been made. The unaudited pro forma condensed consolidated statements of income are not necessarily indicative of what actual results of operations would have been had the Company made these acquisitions on the first day of the period presented, nor does it purport to represent the results of operations for future periods.

 

15


Empire State Realty Trust, Inc.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of March 31, 2014

(Unaudited)

(amounts in thousands)

 

     Historical
Empire State
Realty Trust,
Inc. (A)
     112 West 34th
Street (B)
     1400 Broadway
(B)
     Pro Forma
Empire State
Realty Trust,
Inc.
 
ASSETS            

Commercial real estate properties, net

   $ 1,352,434       $ 261,626       $ 178,340       $ 1,792,400   

Cash and cash equivalents

     44,703         3,004         130         47,837   

Restricted cash

     54,832         1,197         3,441         59,470   

Tenant and other receivables, net

     29,644         730         720         31,094   

Deferred rent receivables, net

     74,971         —           —           74,971   

Prepaid expenses and other assets

     23,535         1,389         2,453         27,377   

Deferred costs, net

     79,032         874         813         80,719   

Acquired below-market ground lease, net

     61,886         142,568         119,331         323,785   

Acquired lease intangibles, net

     237,900         52,689         35,916         326,505   

Goodwill

     491,479         —           —           491,479   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 2,450,416       $ 464,077       $ 341,144       $ 3,255,637   
  

 

 

    

 

 

    

 

 

    

 

 

 
LIABILITIES AND EQUITY            

Liabilities:

           

Mortgage notes payable

   $ 878,545       $ 96,538       $ 86,863       $ 1,061,946   

Term loan and credit facility

     325,000         107,886         82,114         515,000   

Accounts payable and accrued expenses

     71,712         6,031         2,949         80,692   

Acquired below-market leases, net

     125,106         24,472         16,681         166,259   

Deferred revenue and other liabilities

     22,574         492         313         23,379   

Tenants’ security deposits

     32,939         1,197         3,482         37,618   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     1,455,876         236,616         192,402         1,884,894   

Equity:

           

Empire State Realty Trust, Inc. stockholders’ equity:

           

Preferred stock

     —           —           —           —     

Class A common stock

     945         12         13         970   

Class B common stock

     11         —           —           11   

Additional paid-in capital

     316,683         19,959         21,214         357,856   

Retained earnings

     63,885         —           —           63,885   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Empire State Realty Trust, Inc.’s stockholders’ equity

     381,524         19,971         21,227         422,722   

Non-controlling interests in operating partnership

     613,016         207,490         127,515         948,021   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total equity

     994,540         227,461         148,742         1,370,743   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities and equity

   $ 2,450,416       $ 464,077       $ 341,144       $ 3,255,637   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(A) Represents the unaudited historical condensed balance sheet of Empire State Realty Trust, Inc. (“ESRT”) as of March 31, 2014.
(B)

Reflects the acquisition of the ground and operating leases at 112 West 34th Street from 112 West 34th Street Associates L.L.C. and 112 West 34th Street Company L.L.C. and the ground lease at 1400 Broadway from 1400 Broadway Associates L.L.C. for $733.6 million consisting of $167.7 million by assumption of existing mortgage debt on the properties, $186.6 million in cash, and $379.3 million in shares common stock of ESRT and operating partnership units of Empire State Realty OP, L.P. (“ESRO”). The cash amount was funded from proceeds from ESRO’s credit facility. Acquisition expenses and loan

 

16


  assumption fees of $5.0 million were funded from cash and cash equivalents and from proceeds from ESRO’s credit facility. The acquisitions are accounted for under the purchase method of accounting in accordance with ASC 805-10, Business Combinations. The allocation of purchase price shown is based on ESRT’s preliminary estimates and is subject to change based on the final determination of the fair value of assets and liabilities acquired.

 

     The acquisition method of accounting was used to allocate the fair value to tangible and identified intangible assets and liabilities acquired. The amounts allocated to net real estate, which includes buildings and building improvements, are depreciated over their estimated useful lives. The amounts allocated to tenant improvements are amortized over the lives of the remaining respective lease terms. The amounts allocated to in-place lease assets, above- and below-market leases and to intangible lease assets are amortized over the lives of the respective remaining lease terms. As a result of the acquisition method of accounting, the carrying value of the mortgage debt assumed for 112 West 34th Street and 1400 Broadway was adjusted to its fair value resulting in a $15.7 million premium. The premium is amortized to interest expense over the remaining lives of the underlying debt instruments.

 

17


Empire State Realty Trust, Inc.

Unaudited Pro Forma Condensed Consolidated Statements of Income

For the Three Months Ended March 31, 2014

(amounts in thousands, except per share amounts)

 

     Historical
Empire State
Realty Trust,
Inc. (AA)
    Adjustments
for 112 West
34th Street
(BB)
    Adjustments
for 1400
Broadway (BB)
    Other Pro
Forma
Adjustments
(CC)
    Pro Forma
Empire State
Realty Trust,
Inc.
 

Revenues:

          

Rental revenue

   $ 90,204      $ 5,615      $ 7,924      $ 1,950  (EE)    $ 105,693   

Tenant expense reimbursement

     15,153        970        1,157        —          17,280   

Observatory revenue

     17,301        —          —          —          17,301   

Construction revenue

     14,963        —          —          —          14,963   

Third-party management and other fees

     611        —          —          (158 ) (FF)      453   

Other revenue and fees

     2,074        7        38        —          2,119   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     140,306        6,592        9,119        1,792        157,809   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Property operating expenses

     36,311        1,968        2,836        (158 ) (FF)      42,132   
           1,175  (GG)   

Marketing, general, and administrative expenses

     8,675        —          —          —          8,675   

Observatory expenses

     6,981        —          —          —          6,981   

Construction expenses

     14,283        —          —          —          14,283   

Real estate taxes

     18,373        1,279        1,263        —          20,915   

Depreciation and amortization

     30,115        996        1,661        4,966  (HH)      37,738   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     114,738        4,243        5,760        5,983        130,724   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating income

     25,568        2,349        3,359        (4,191     27,085   

Interest expense

     (14,337     (1,396     (1,253     (641 ) (II)      (16,476
           1,151  (JJ)   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     11,231        953        2,106        (3,681     10,609   

Net income attributable to non-controlling interests

     (6,862     —          —          467  (KK)      (6,395
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Empire State Realty Trust, Inc.

   $ 4,369      $ 953      $ 2,106      $ (3,214   $ 4,214   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total weighted average shares:

          

Basic

     95,575              98,242   
  

 

 

         

 

 

 

Diluted

     95,617              98,284   
  

 

 

         

 

 

 

Net income per share attributable to Empire State Realty Trust, Inc.:

          

Basic earnings per share

   $ 0.05            $ 0.04   
  

 

 

         

 

 

 

Diluted earnings per share

   $ 0.05            $ 0.04   
  

 

 

         

 

 

 

Dividends per share

   $ 0.085            $ 0.085   
  

 

 

         

 

 

 

 

18


Empire State Realty Trust, Inc.

Unaudited Pro Forma Condensed Consolidated Statements of Income

For the Year Ended December 31, 2013

(amounts in thousands, except per share amounts)

 

     Empire State
Realty Trust,
Inc.
    The
Predecessor
                         
     Period from
October 7,
2013 through
December 31,
2013 (AA)
    Period from
January 1,
2013 through
October 6,
2013 (DD)
    112 West
34th Street
(BB)
    1400
Broadway
(BB)
    Pro Forma
Adjustments
(CC)
    Pro Forma
Empire State
Realty Trust,
Inc.
 

Revenues:

            

Rental revenue

   $ 79,987      $ 148,690      $ 22,750      $ 27,503      $ 11,115  (EE)    $ 290,045   

Tenant expense reimbursement

     15,836        21,272        3,866        4,205        —          45,179   

Observatory revenue

     23,735        —          —          —          —          23,735   

Construction revenue

     5,265        18,636        —          —          —          23,901   

Third-party management and other fees

     550        5,067        —          —          (499 ) (FF)      5,118   

Other revenue and fees

     2,210        12,407        7,100        6,271        (12,557 ) (FF)      14,594   
             (837 ) (FF)   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     127,583        206,072        33,716        37,979        (2,778     402,572   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

            

Property operating expenses

     34,453        41,297        9,041        10,336        (1,336 ) (FF)      98,489   
             4,698  (GG)   

Marketing, general, and administrative expenses

     15,254        23,600        —          —          —          38,854   

Observatory expenses

     5,687        —          —          —          —          5,687   

Construction expenses

     5,468        19,821        —          —          —          25,289   

Real estate taxes

     17,191        24,331        4,980        4,923        —          51,425   

Formation transaction expenses

     —          4,507        —          —          —          4,507   

Depreciation and amortization

     27,375        38,963        5,463        6,293        18,634  (HH)      96,728   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     105,428        152,519        19,484        21,552        21,996        320,979   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating income

     22,155        53,553        14,232        16,427        (24,774     81,593   

Other income (expense):

            

Equity in net income of non-controlled entities

     —          14,875        —          —          —          14,875   

Interest expense

     (13,147     (50,660     (5,621     (4,726     (2,565 ) (II)      (72,192
             4,527  (JJ)   

Settlement expense

     —          (55,000     —          —          —          (55,000

Acquisition expenses

     (138,140     —          (1,596     (1,307     2,903  (FF)      (138,140

Gain on consolidation of non-controlling interests

     322,563        —          —          —          —          322,563   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     193,431        (37,232     7,015        10,394        (19,909     153,699   

Net income (loss) attributable to the Predecessor

     —          37,232        (5,381     (7,973     13,046        36,924   

Net income attributable to non-controlling interests

     (118,186     —          —          —          (2,669 ) (KK)      (120,885
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Empire State Realty Trust, Inc.

   $ 75,245      $ —        $ 1,634      $ 2,421      $ (9,532   $ 69,768   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total weighted average shares:

            

Basic

     95,574                98,237   
  

 

 

           

 

 

 

Diluted

     95,611                98,273   
  

 

 

           

 

 

 

Net income per share attributable to Empire State Realty Trust, Inc.:

            

Basic earnings per share

   $ 0.79              $ 0.71   
  

 

 

           

 

 

 

Diluted earnings per share

   $ 0.79              $ 0.71   
  

 

 

           

 

 

 

Dividends per share

   $ 0.0795              $ 0.0795   
  

 

 

           

 

 

 

 

19


(AA) Represents ESRT’s unaudited historical condensed consolidated statements of income for the three months ended March 31, 2014 and the period from October 7, 2013 through December 31, 2013.
(BB) Reflects the acquisition of the ground and operating leases at 112 West 34th Street from 112 West 34th Street Associates L.L.C. and 112 West 34th Street Company L.L.C. and the ground lease at 1400 Broadway from 1400 Broadway Associates L.L.C. for $733.6 million consisting of $167.7 million by assumption of existing mortgage debt on the properties, $186.6 million in cash, and $379.3 million in shares common stock of ESRT and operating partnership units of ESRO. The cash amount was funded from proceeds from ESRO’s credit facility. Acquisition expenses and loan assumption fees of $5.0 million were funded from cash and cash equivalents and from proceeds from ESRO’s credit facility. The acquisitions are accounted for under the purchase method of accounting in accordance with ASC 805-10, Business Combinations. The allocation of purchase price shown is based on ESRT’s preliminary estimates and is subject to change based on the final determination of the fair value of assets and liabilities acquired.

The acquisition method of accounting was used to allocate the fair value to tangible and identified intangible assets and liabilities acquired. The amounts allocated to net real estate, which includes buildings and building improvements, are depreciated over their estimated useful lives. The amounts allocated to tenant improvements are amortized over the lives of the remaining respective lease terms. The amounts allocated to in-place lease assets, above- and below-market leases and to intangible lease assets are amortized over the lives of the respective remaining lease terms. As a result of the acquisition method of accounting, the carrying value of the mortgage debt assumed for 112 West 34th Street and 1400 Broadway was adjusted to its fair value resulting in a $15.7 million premium. The premium is amortized to interest expense over the remaining lives of the underlying debt instruments.

 

(CC) Excludes non-recurring acquisition expenses related to the acquisition of 112 West 34th Street and 1400 Broadway.
(DD) Represents ESRT’s Predecessor’s condensed statement of income for the period January 1, 2013 through October 6, 2013. See ESRT’s Annual Report on Form 10-K for the year ended December 31, 2013 for additional explanation regarding the Predecessor.
(EE) Rental revenue has been adjusted to reflect pro forma adjustments for the net amortization of acquired above- and below-market lease assets and liabilities and the pro forma adjustments to straight line rental revenue assuming the acquisitions occurred on January 1, 2013.
(FF) Supervisory and management fees, acquisition cost reimbursement, and other income from the acquired properties are eliminated in consolidation for pro forma purposes.
(GG) To record amortization of acquired below-market ground lease assets over the lives of the remaining respective lease terms.
(HH) Depreciation and amortization have been adjusted to reflect pro forma depreciation and amortization. The acquisition method of accounting was used to allocate the fair value to tangible and identified intangible assets and liabilities acquired. In order to calculate depreciation and amortization expense, the amounts allocated to net real estate, which includes buildings and building improvements, were depreciated over their estimated useful lives of 40 years. The amounts allocated to tenant improvements were amortized over the lives of the remaining respective lease terms. The amounts allocated to in-place lease assets were amortized over the lives of the respective remaining lease terms.
(II) To record the pro forma effect of interest expense on borrowings of $190.0 million under ESRT’s credit facility. A variance in interest rate of 1/8% on the credit facility would have an impact of $0.2 million and $0.1 million on net income attributable to Empire State Realty Trust, Inc. for the year ended December 31, 2013 and the three months ended March 31, 2014.
(JJ) Interest expense has been adjusted to reflect pro forma changes in deferred finance cost amortization and reduction in interest expense related to the fair value adjustment on the assumed debt.
(KK) Net income attributable to non-controlling interests has been adjusted to reflect pro forma changes to net income and the issuance of ESRO units as a result of the acquisitions.

 

20


SIGNATURE

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

 

    EMPIRE STATE REALTY TRUST, INC. (Registrant)
    By:  

/s/ Thomas N. Keltner, Jr.

Date: July 21, 2014       Name:   Thomas N. Keltner, Jr.
      Title:   Executive Vice President & General Counsel

 

21

Exhibit 10.4

EXECUTION VERSION

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT, dated as of July 15, 2014, is made and entered into by and between Empire State Realty Trust, Inc., a Maryland corporation (the “ Company ”), and the Holders (as defined herein).

RECITALS

WHEREAS, in connection with the exercise of the options (the “ Option Exercise ”) to acquire 112 West 34th Street Company L.L.C.’s and 112 West 34 th Street Company L.L.C.’s leasehold and fee interests in the properties located at 112 West 34 th Street and 122 West 34 th Street, New York, New York (“ 112 West 34 th Street ”), and 1400 Broadway Associates L.L.C.’s leasehold interest in the property located at 1400 Broadway, New York, New York (“ 1400 Broadway ” and, together with 112 West 34th Street, the “ Option Properties ”), the Company and Empire State Realty OP, L.P., a Delaware limited partnership (the “ Operating Partnership ”), will acquire the Option Properties (the “ Acquisition ”), pursuant to which holders of interests (or certain related parties) (collectively, the “ Existing Holders ”) in the entities that own the interests in the Option Properties (the “ Existing Entities ”) will receive, in exchange for their respective interests in the Existing Entities, directly or indirectly through distributions of such securities by the Existing Entities, (i) units representing limited partnership interests (the “ OP Units ”) of the Operating Partnership, redeemable, under certain circumstances, into shares of Class A Common Stock, $0.01 par value per share of the Company (the “ Class A Common Stock ”), on a one-for-one basis (the “ Contributor OP Interests ”); (ii) shares of Class B Common Stock, $0.01 par value per share (the “ Class B Common Stock ”) of the Company, convertible, under certain circumstances, into shares of Class A Common Stock on a one-for-one basis (the “ Contributor REIT Interests ” and, together with the Contributor OP Interests, the “ Contributor Interests ”); (iii) shares of Class A Common Stock (the “ Initial Contributor Shares ”); and/or (iv) cash;

WHEREAS, the Company desires to enter into this Agreement with the Holders (as defined below) in order to grant the Holders the registration rights contained herein.

NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

Section 1. Definitions . As used in this Agreement, the following terms shall have the following meanings:

112 West 34 th Street ” shall have the meaning set forth in the Recitals hereof.

1400 Broadway ” shall have the meaning set forth in the Recitals hereof.

Agreement ” shall mean this Registration Rights Agreement as originally executed and as amended, supplemented or restated from time to time.

Acquisition ” shall have the meaning set forth in the Recitals hereof.

Board ” shall mean the Board of Directors of the Company.

Business Day ” shall mean any day other than Saturday, Sunday or a day on which commercial banks in New York, New York are directed or permitted to be closed.


Class A Common Stock ” shall the meaning set forth in the Recitals hereof.

Class B Common Stock ” shall have the meaning set forth in the Recitals hereof.

Commission ” shall mean the Securities and Exchange Commission.

Company ” shall have the meaning set forth in the introductory paragraph hereof.

Consolidation Registration Rights Agreement ” shall mean that certain registration rights agreement dated as of October 7, 2013 by and between the Company and the holders as defined therein.

Contributor Interests ” shall have the meaning set forth in the Recitals hereof.

Contributor OP Interests ” shall have the meaning set forth in the Recitals hereof.

Contributor REIT Interests ” shall have the meaning set forth in the Recitals hereof.

Contributor Shares ” shall mean the Initial Contributor Shares, the shares of Class A Common Stock that may be acquired by the Holders in connection with the exercise by such Holders of the exchange or conversion rights associated with the Contributor Interests.

Controlling Person ” shall have the meaning set forth in Section 5(a) of this Agreement.

Convertible Class B Common Stock ” shall mean shares of Class B Common Stock that may be automatically converted to shares of Class A Common Stock pursuant to Section 6.3.7 of the Articles of Amendment and Restatement of the Company.

Depositary ” shall mean The Depository Trust Company, or any other depositary appointed by the Company, provided, however, that such depositary must have an address in the Borough of Manhattan, in the City of New York.

End of Suspension Notice ” shall have the meaning set forth in Section 3(a) of this Agreement.

Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended (or any corresponding provision of succeeding law) and the rules and regulations thereunder.

Exchangeable OP Units ” shall mean OP Units that may be redeemable for cash or, at the Company’s option, exchangeable for shares of Class A Common Stock pursuant to Section 8.06 of the Amended and Restated Agreement of Limited Partnership of the Operating Partnership.

Existing Entities ” shall have the meaning set forth in the Recitals hereof.

Existing Holders ” shall have the meaning set forth in the Recitals hereof.

FINRA ” shall mean the Financial Industry Regulatory Authority, Inc.

Holders ” shall mean (i) the Existing Holders as holders of Registrable Securities and (ii) any direct or indirect transferee (to the extent permitted under the Articles of Amendment and Restatement of the Company, the Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as applicable) of such Registrable Securities from an Existing Holder provided , that such transferee agrees in writing to be bound by all the provisions hereof. For purposes of this Agreement, the Company may deem and treat the registered holder of a Registrable Security as the Holder and absolute owner thereof, unless notified to the contrary in writing by the registered Holder thereof.

 

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Initial Contributor Shares ” shall have the meaning set forth in the Recitals hereof.

IPO ” shall mean the Company’s initial public offering of Class A Common Stock, which closed on October 7, 2013.

Issuer Shelf Effective Date ” shall have the meaning set forth in Section 2.1(b)(ii) of this Agreement.

Issuer Shelf Registration Statement ” shall have the meaning set forth in Section 2.1(b)(i) of this Agreement.

Liabilities ” shall have the meaning set forth in Section 5(a)(i) of this Agreement.

Malkin Group ” shall mean all of the following, as a group: Anthony E. Malkin, Peter L. Malkin and each of their lineal descendents (including spouses of such descendents), any estates of any of the foregoing, any trusts now or hereafter established for the benefit of any of the foregoing, or any corporation, partnership, limited liability company or other legal entity controlled by Anthony E. Malkin for the benefit of any of the foregoing.

Notice and Questionnaire ” shall mean a written notice, substantially in the form attached as Exhibit A , delivered by a Holder to the Company (i) notifying the Company of such Holder’s desire to include Registrable Securities held by it in a Resale Shelf Registration Statement, (ii) containing all information about such Holder required to be included in such Resale Shelf Registration Statement in accordance with applicable law, including Item 507 of Regulation S-K promulgated under the Securities Act, as amended from time to time, or any similar successor rule thereto, and (iii) pursuant to which such Holder agrees to be bound by the terms and conditions hereof.

Operating Partnership ” shall have the meaning set forth in the Recitals hereof.

OP Units ” shall have the meaning set forth in the Recitals hereof.

Option Exercise ” shall have the meaning set forth in the Recitals hereof.

Operating Partnership ” shall have the meaning set forth in the Recitals hereof.

Option Properties ” shall have the meaning set forth in the Recitals hereof.

Person ” shall mean any individual, partnership, corporation, limited liability company, joint venture, association, estate, trust, unincorporated organization or other governmental or legal entity.

Primary Shares ” shall have the meaning set forth in Section 2.1(b)(i) of this Agreement.

Registrable Securities ” shall mean at any time the Contributor Shares, including upon the transfer thereof by the original Holders or any subsequent Holders and any securities issued in respect of such securities by reason of or in connection with any exchange for or replacement of such securities or any stock dividend, stock distribution, stock split, purchase in any rights offering or in connection with any combination of shares, recapitalization, merger or consolidation, or any other equity securities issued pursuant to any other pro rata distribution with respect to the Class A Common Stock, until, as to any

 

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particular Registrable Security, the earliest time as one of the following shall have occurred: (i) a Registration Statement covering all such securities has been declared effective by the Commission and all such shares have been disposed of pursuant to such effective Registration Statement; (ii) such securities (other than Restricted Securities) were issued pursuant to an effective Registration Statement, (iii) such Registrable Securities have been publicly sold under Rule 144 under the Securities Act, (iv) with respect to Holders that individually hold less than 1% of the Registrable Securities originally issued in connection with the Acquisition, such Registrable Securities may be sold in one transaction pursuant to Rule 144; or (v) such securities have been otherwise transferred in a transaction that constitutes a sale thereof under the Securities Act and such shares subsequently may be resold or otherwise transferred by such transferee without registration under the Securities Act.

Registration Statement ” means any registration statement filed by the Company with the Commission in compliance with the Securities Act (including any Shelf Registration Statement) for a public offering and sale of the Class A Common Stock or other securities of the Company, including the prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all materials incorporated by reference or deemed to be incorporated by reference in such registration statement (other than a registration statement (i) on Form S-4 or any successor form to Form S-4, (ii) covering only securities proposed to be issued in exchange for securities or assets of another entity, (iii) in connection with an exchange offer or an offering of securities exclusively to existing security holders of the Company or its subsidiaries, (iv) relating to a transaction pursuant to Rule 145 of the Securities Act, (v) for an offering of debt, or (vi) for a dividend reinvestment plan).

Resale Shelf Effective Date ” shall have the meaning set forth in Section 2.1(a) of this Agreement.

Resale Shelf Registration Statement ” shall have the meaning set forth in Section 2.1(a) of this Agreement.

Restricted Securities ” means shares of Class A Common Stock issued under an Issuer Shelf Registration Statement which if sold by the holder thereof would constitute “restricted securities” as defined under Rule 144 under the Securities Act.

Securities Act ” shall mean the Securities Act of 1933, as amended.

Selling Holder ” shall mean a Holder who is selling Registrable Securities pursuant to a Registration Statement pursuant to the terms hereof.

Selling Holders’ Counsel ” shall mean the counsel for the Malkin Group.

Shelf Effectiveness Period ” shall have the meaning set forth in Section 2.1(c) of this Agreement.

Shelf Registration Statement ” shall mean a Resale Shelf Registration Statement and/or an Issuer Shelf Registration Statement.

Suspension Event ” shall have the meaning set forth in Section 3(a) of this Agreement.

Suspension Notice ” shall have the meaning set forth in Section 3(a) of this Agreement.

Underwriter ” means a securities dealer who purchases any Registrable Securities as principal and not as part of such dealer’s market-making activities.

 

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Underwritten Offering ” shall mean a sale of securities of the Company to an Underwriter or Underwriters for reoffering to the public.

Section 2. Registrations .

2.1 Shelf Registration .

(a) Resale Shelf Registration . Subject to Section 3 hereto, the Company agrees to use commercially reasonable efforts to file with the Commission not later than 12 months from the beginning of the first full calendar month following the closing of the IPO with the Commission a “shelf” registration statement on Form S-3 (or, if the Company is not eligible to use Form S-3, on Form S-11 or any similar or successor form) with respect to the resale of all the Registrable Securities by the Holders thereof (a “ Resale Shelf Registration Statement ”) for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act. The Company shall use its commercially reasonable efforts to cause such Resale Shelf Registration Statement to be declared effective by the Commission within 120 days following the date of filing thereof (the “ Resale Shelf Effective Date ”). The Resale Shelf Registration Statement shall be on an appropriate form and the registration statement and any form of prospectus included therein (or prospectus supplement relating thereto) shall reflect the plan of distribution or method of sale as the Holders may from time to time notify the Company. The Company agrees to use its commercially reasonable efforts to provide notice to the Holders, including the form of Notice and Questionnaire attached hereto as Exhibit A, on or prior to the date five (5) Business Days prior to the Resale Shelf Effective Date.

At the time the Resale Shelf Registration Statement is declared effective, each Holder that has delivered a duly completed and executed Notice and Questionnaire to the Company on or prior to the date ten (10) Business Days prior to such time of effectiveness shall be named as a selling securityholder in the Resale Shelf Registration Statement and the related prospectus in such a manner as to permit such Holder to deliver such prospectus to purchasers of Registrable Securities in accordance with applicable law. If required by applicable law, subject to the terms and conditions hereof, after effectiveness of the Resale Shelf Registration Statement, the Company shall file a supplement to such prospectus or amendment to the Resale Shelf Registration Statement not less than once a calendar quarter as necessary to name as selling securityholders therein any Holders that provide to the Company a duly completed and executed Notice and Questionnaire and shall use reasonable efforts to cause any post-effective amendment to such Resale Shelf Registration Statement filed for such purpose to be declared effective by the Commission as promptly as reasonably practicable after the filing thereof.

(b) Issuer Shelf Registration .

(i) The Company may, at its option, satisfy its obligation to prepare and file a Resale Shelf Registration Statement pursuant to Section 2.1(a) solely with respect to shares of Class A Common Stock issuable upon exchange of Exchangeable OP Units and/or conversion of Convertible Class B Common Stock by preparing and filing with the Commission not later than 12 months from the beginning of the first full calendar month following the closing of the IPO one or more “shelf” registration statements on Form S-3 (or, if the Company is not eligible to use Form S-3, on Form S-11 or any similar or successor form) (an “ Issuer Shelf Registration Statement ”) providing for (i) the issuance by the Company, from time to time, to the Holders of such Exchangeable OP Units and/or Convertible Class B Common Stock upon redemption or conversion thereof, of shares of Class A Common Stock registered under the Securities Act (the “ Primary Shares ”); and (ii) to the extent such Primary Shares constitute Restricted Securities, the registered resale thereof by their Holders from time to time in accordance with the methods of distribution elected by the Holders and set forth therein (but not an Underwritten Offering).

(ii) The Company shall use its commercially reasonable efforts to cause any Issuer Shelf Registration Statement to be declared effective by the Commission within 120 days following the date of filing thereof (the “ Issuer Shelf Effective Date ”).

 

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(c) Shelf Registration Effectiveness . Subject to Sections 2.1(d) and 3 hereof, the Company shall use commercially reasonable efforts to keep any Shelf Registration Statement continuously effective for the period (the “ Shelf Effectiveness Period ”) beginning on the date on which a Shelf Registration Statement is declared effective and ending on the date that all of the Registrable Securities registered under a Shelf Registration Statement cease to be Registrable Securities. During the period that a Shelf Registration Statement is effective, the Company shall supplement or make amendments to the Shelf Registration Statement, if required by the Securities Act or if reasonably requested by the Holders (whether or not required by the form on which the securities are being registered), including to reflect any specific plan of distribution or method of sale, and shall use its commercially reasonable efforts to have such supplements and amendments declared effective, if required, as soon as practicable after filing.

(d) Shelf Registration Subsequent Filings . The Company shall prepare and file such additional Registration Statements as necessary and use its commercially reasonable efforts to cause such Registration Statements to be declared effective by the Commission so that a Shelf Registration Statement remains continuously effective, subject to Section 3 , with respect to the Registrable Securities as and for the period required under Section 2.1(c) , as applicable (such subsequent Registration Statements to constitute a Resale Shelf Registration Statement or an Issuer Shelf Registration Statement, as the case may be, hereunder).

(e) Selling Holders Become Party to Agreement . Each Holder acknowledges that by participating in its registration rights pursuant to this Agreement, such Holder will be deemed a party to this Agreement and will be bound by its terms, notwithstanding such Holder’s failure to deliver a Notice and Questionnaire; provided, that any Holder that has not delivered a duly completed Notice and Questionnaire shall not be entitled to be named as a Selling Holder in, or have the Registrable Securities held by it covered by, a Shelf Registration Statement.

(f) Additional Rights Under the Consolidation Registration Rights Agreement . It is understood and agreed that all of the Registrable Securities held by the Malkin Group pursuant to this Agreement shall be subject to the rights to which the Malkin Group is entitled under Sections 2.1(c) ( Underwritten Registered Resales ), 2.1(d) ( Underwriters ), 2.2 ( Underwritten Demand Registration ), 2.3 ( Piggy-Back Rights ), and 2.4 ( Reduction of Offering ) of the Consolidation Registration Rights Agreement; and such Registrable Securities shall be taken into account when such rights are exercised by the Malkin Group in accordance with the Consolidation Registration Rights Agreement.

Section 3. Black-Out Periods .

(a) Notwithstanding the provisions of Sections 2.1(a) , 2.1(b) or 4 , the Company shall be permitted to postpone the filing of the Registration Statement (including any Shelf Registration Statement), and from time to time to require Holders not to sell under the Registration Statement or to suspend the use or effectiveness thereof, for such times as the Company reasonably may determine is necessary and advisable (but in no event shall the Company be entitled to exercise such right more than two times or for more than an aggregate of 150 days in any rolling 12-month period commencing on the date of this Agreement, except as a result of a refusal by the Commission to declare any post-effective amendment to the Registration Statement effective after the Company has used all commercially reasonable efforts to cause the post-effective amendment to be declared effective by the Commission, in which case, the Company must terminate the black-out period immediately following the effective date of

 

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the post-effective amendment), if any of the following events shall occur (each such circumstance a “ Suspension Event ”): (i) a majority of the Board determines in good faith that (A) the offer or sale of any Registrable Securities would materially impede, delay or interfere with any proposed financing, offer or sale of securities, acquisition, corporate reorganization or other material transaction involving the Company, (B) after the advice of counsel, the sale of Registrable Securities pursuant to the Registration Statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable law, or (C) (x) the Company has a bona fide business purpose for preserving the confidentiality of such transaction, (y) disclosure would have a material adverse effect on the Company or the Company’s ability to consummate such transaction, or (z) such transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable, based on the advice of counsel, to cause the Registration Statement (or such filings) to become effective or to promptly amend or supplement the Registration Statement on a post effective basis, as applicable; or (ii) a majority of the Board determines in good faith, upon the advice of counsel, that it is in the Company’s best interest or it is required by law, rule or regulation to supplement the Registration Statement or file a post-effective amendment to the Registration Statement in order to ensure that the prospectus included in the Registration Statement (1) contains the information required under Section 10(a)(3) of the Securities Act; (2) discloses any facts or events arising after the effective date of the Registration Statement (or of the most recent post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth therein; or (3) discloses any material information with respect to the plan of distribution that was not disclosed in the Registration Statement or any material change to such information. Upon the occurrence of any such suspension, the Company shall use its commercially reasonable efforts to cause the Registration Statement to become effective or to promptly amend or supplement the Registration Statement on a post effective basis or to take such action as is necessary to permit resumed use of the Registration Statement or filing thereof as soon as possible.

The Company will provide written notice (a “ Suspension Notice ”) to the Holders and the Selling Holders’ Counsel, if any, of the occurrence of any Suspension Event. If as a result of a Suspension Event, the Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, each Holder agrees that (i) it will immediately discontinue offers and sales of the Registrable Securities under the Registration Statement until the Holder receives copies of a supplemental or amended prospectus (which the Company agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by the Company that it may resume such offers and sales, and (ii) it will maintain the confidentiality of any information included in the written notice delivered by the Company unless otherwise required by law or subpoena. If so directed by the Company, each Holder will deliver to the Company (at the expense of the Company) all copies of the prospectus covering the Registrable Securities at the time of receipt of the Suspension Notice, other than permanent file copies in the possession of such Holder’s counsel. The Holders may recommence effecting sales of the Registrable Securities pursuant to the Registration Statement (or such filings) following further written notice to such effect (an “ End of Suspension Notice ”) from the Company, which End of Suspension Notice shall be given by the Company to the Holders and to the Selling Holders’ Counsel, if any, promptly following the conclusion of any Suspension Event and its effect.

(b) In connection with any Registration Statement utilized by the Company to satisfy its obligations under this Agreement, each Holder agrees to cooperate with the Company in connection with the preparation of the Registration Statement, and each Holder agrees that it will (i) respond within ten (10) Business Days to any written request by the Company to provide or verify information regarding the Holder or the Holder’s Registrable Securities (including the proposed manner of sale) that may be

 

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required to be included in such Registration Statement and related prospectus pursuant to the rules and regulations of the Commission, and (ii) provide in a timely manner information regarding the proposed distribution by the Holder of the Registrable Securities and such other information as may be requested by the Company from time to time in connection with the preparation of and for inclusion in the Registration Statement and related prospectus.

(c) If all reports required to be filed by the Company pursuant to the Exchange Act have not been filed by the required date taking into account any permissible extension, upon written notice thereof by the Company to the Holders, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to any Registration Statement or to require the Company take action with respect to the registration or sale of any Registrable Securities pursuant to any Registration Statement shall be suspended until the date on which the Company has filed such reports, and the Company shall use commercially reasonable efforts, taking into account the circumstances of the Company at such time, to file the required reports as promptly as commercially practicable, and shall notify the Holders as promptly as practicable when such suspension is no longer required.

(d) Notwithstanding any provision herein to the contrary, if the Company shall give a Suspension Notice with respect to any Registration Statement pursuant to Section 3(a) , the Company agrees that it shall extend the period of time during which such Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from the date of receipt by the Holders of the Suspension Notice to and including the date of receipt by the Holders of the End of Suspension Notice and provide copies of the supplemented or amended prospectus necessary to resume sales, with respect to each Suspension Event; provided , that , such period of time shall not be extended beyond the date that Class A Common Stock covered by such Registration Statement are no longer Registrable Securities.

Section 4. Registration Procedures .

(a) Subject to Section 3 hereof, in connection with the filing of any Shelf Registration Statement as provided in this Agreement, the Company shall use commercially reasonable efforts to, as expeditiously as reasonably practicable:

(i) prepare and file with the Commission a Registration Statement with respect to such Registrable Securities, within the relevant time period specified in Sections 2.1(a) and/or 2.1(b) hereof, on the appropriate form under the Securities Act, which form (1) shall be selected by the Company, (2) shall be available for the registration and sale of the Registrable Securities by the Selling Holders thereof, (3) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the Commission to be filed therewith or incorporated by reference therein, and (4) shall comply in all respects with the requirements of Regulation S-T under the Securities Act, and otherwise comply with its obligations under Section 2 hereof;

(ii) prepare and file with the Commission such amendments and post-effective amendments to such Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the applicable period; and cause each prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the Securities Act and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations thereunder applicable to them with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the Selling Holders thereof;

 

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(iii) (1) notify each Holder of Registrable Securities, not later than ten (10) Business Days after filing, that a Registration Statement with respect to the Registrable Securities has been filed and advising such Holder that the distribution of Registrable Securities will be made in accordance with any method or combination of methods legally available by the Selling Holders of any and all Registrable Securities and providing a Notice and Questionnaire for completion by each such Holder desiring to be included as a Selling Holder therein; (2) furnish to each Selling Holder of Registrable Securities and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each prospectus, including each preliminary prospectus, and any amendment or supplement thereto and such other documents as such Selling Holder or Underwriter may reasonably request, including financial statements and schedules in order to facilitate the public sale or other disposition of the Registrable Securities; and (3) hereby consent to the use of the prospectus or any amendment or supplement thereto by the Selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the prospectus or any amendment or supplement thereto;

(iv) use its commercially reasonable efforts to register or qualify the Registrable Securities by the time the applicable Registration Statement is declared effective by the Commission under all applicable state securities or “blue sky” laws of such jurisdictions as any Selling Holder of Registrable Securities covered by the Registration Statement and each Underwriter of an Underwritten Offering of Registrable Securities shall reasonably request in writing, and do any and all other acts and things which may be reasonably necessary or advisable to enable each such Selling Holder and Underwriter to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Selling Holder; provided , however , that the Company shall not be required to (1) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 4(a)(iv) , or (2) take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject;

(v) notify promptly each Selling Holder of Registrable Securities under the Registration Statement and, if requested by such Selling Holder, confirm such advice in writing promptly at the address determined in accordance with Section 8(f) of this Agreement (1) when the Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (2) of any request by the Commission or any state securities authority for post-effective amendments and supplements to the Registration Statement and prospectus or for additional information after the Registration Statement has become effective, (3) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (4) of the happening of any event or the discovery of any facts during the period the Registration Statement is effective as a result of which the Registration Statement or the related prospectus or any document incorporated by reference therein contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading or, in the case of the prospectus, contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (which information shall be accompanied by an instruction to suspend the use of the Registration Statement and the prospectus (such instruction to be provided in the same manner as a Suspension Notice) until the requisite changes have been made, at which time notice of the end of suspension shall be delivered in the same manner as an End of Suspension Notice), (5) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities, for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (6) of the filing of a post-effective amendment to the Registration Statement;

 

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(vi) furnish Selling Holders’ Counsel, if any, copies of any comment letters relating to the Selling Holders received from the Commission or any other request by the Commission or any state securities authority for amendments or supplements to the Registration Statement and prospectus or for additional information relating to the Selling Holders;

(vii) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment and to re-qualify the Registrable Securities for resale after any suspension thereof;

(viii) furnish to each Selling Holder of Registrable Securities, and each Underwriter, if any, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested);

(ix) cooperate with the Selling Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the Selling Holders or the Underwriters, if any, may reasonably request at least three (3) Business Days prior to the closing of any sale of Registrable Securities;

(x) upon the occurrence of any event or the discovery of any facts, as contemplated by Sections 4(a)(v)(2) and 4(a)(v)(4) hereof, as promptly as practicable after the occurrence of such an event, use its commercially reasonable efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or will remain so qualified, as applicable. At such time as such public disclosure is otherwise made or the Company determines that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Company agrees promptly to notify each Selling Holder of such determination and to furnish each Selling Holder such number of copies of the prospectus as amended or supplemented, as such Selling Holder may reasonably request;

(xi) within a reasonable time prior to the filing of any Registration Statement, any prospectus, any amendment to a Registration Statement or amendment or supplement to a prospectus, provide copies of such document to the Selling Holders’ Counsel, if any, on behalf of such Selling Holder, consider only changes reasonably requested by such Selling Holder’s Counsel and make representatives of the Company as shall be reasonably requested by the Selling Holders of Registrable Securities available for discussion of such document;

(xii) obtain one or more CUSIP numbers for the Registrable Securities not later than the effective date of a Registration Statement, and provide the Company’s transfer agent with printed certificates for the Registrable Securities, in a form eligible for deposit with the Depositary, in each case, to the extent necessary or applicable;

 

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(xiii) enter into agreements (including underwriting agreements) and take all other customary appropriate actions in order to expedite or facilitate the disposition of such Registrable Securities whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Offering:

(A) make such representations and warranties to the Selling Holders of such Registrable Securities and the Underwriters, if any, in form, substance and scope as are customarily made by issuers to Underwriters in similar Underwritten Offerings as may be reasonably requested by them;

(B) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to any managing Underwriter(s) and their counsel) addressed to the Underwriters, if any, covering the matters customarily covered in opinions requested in Underwritten Offerings and such other matters as may be reasonably requested by the Underwriter(s);

(C) obtain “comfort” letters and updates thereof from the Company’s independent registered public accounting firm (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements are, or are required to be, included in the Registration Statement) addressed to the Underwriter(s), if any (to the extent consistent with Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts), such letters to be in customary form and covering matters of the type customarily covered in “comfort” letters to Underwriters in connection with similar Underwritten Offerings;

(D) enter into a securities sales agreement with the Selling Holders and an agent of the Selling Holders providing for, among other things, the appointment of such agent for the Selling Holders for the purpose of soliciting purchases of Registrable Securities, which agreement shall be in form, substance and scope customary for similar offerings;

(E) if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 5 hereof with respect to the Underwriters and all other parties to be indemnified pursuant to said Section or, at the request of any Underwriters, in the form customarily provided to such Underwriters in similar types of transactions; and

(F) deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Selling Holders of a majority in principal amount of the Registrable Securities being sold and the managing Underwriters, if any;

(xiv) make available for inspection by any Underwriter participating in any disposition pursuant to a Registration Statement, Selling Holders’ Counsel and any accountant retained by a majority in principal amount of the Registrable Securities being sold, all financial and other records, pertinent corporate documents and properties or assets of the Company reasonably requested by any such persons, and cause the respective officers, directors and any other agents of the Company to supply all information reasonably requested by any such

 

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representative, Underwriter, counsel or accountant in connection with a Registration Statement, and make such representatives of the Company available for discussion of such documents as shall be reasonably requested by the Selling Holders’ Counsel; provided , however , that the Selling Holders’ Counsel, if any, and the representatives of any Underwriters will use commercially reasonable efforts, to the extent reasonably practicable, to coordinate the foregoing inspection and information gathering and to not materially disrupt the Company’s business operations;

(xv) a reasonable time prior to filing any Registration Statement, any prospectus forming a part thereof, any amendment to such Registration Statement, or amendment or supplement to such prospectus, provide copies of such document to the Underwriter(s) of an Underwritten Offering of Registrable Securities; within five (5) Business Days after the filing of any Registration Statement, provide copies of such Registration Statement to Selling Holders’ Counsel; make such changes in any of the foregoing documents prior to the filing thereof, or in the case of changes received from Selling Holders’ Counsel by filing an amendment or supplement thereto, as the Underwriter or Underwriters, or in the case of changes received from Selling Holders’ Counsel relating to the Selling Holders or the plan of distribution of Registrable Securities, as Selling Holders’ Counsel, reasonably requests; not file any such document in a form to which any Underwriter shall not have previously been advised and furnished a copy of or to which any Underwriter shall reasonably object; reasonably consider the Selling Holders’ Counsel’s comments, if any, in preparing the Registration Statement; not include in any amendment or supplement to such documents any information about the Selling Holders or any change to the plan of distribution of Registrable Securities that would limit the method of distribution of the Registrable Securities unless Selling Holders’ Counsel has been advised in advance and has approved such information or change; and make the representatives of the Company available for discussion of such document as shall be reasonably requested by the Selling Holders’ Counsel, if any, on behalf of such Selling Holder, Selling Holders’ Counsel or any Underwriter;

(xvi) cause senior representatives, including senior management, of the Company to participate in any “road show” or “road shows” reasonably requested by any Underwriter;

(xvii) furnish to each Underwriter, if any, a signed counterpart, addressed to such Selling Holder or Underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) if eligible under Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts, a comfort letter or comfort letters from the Company’s independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the managing Underwriter or Underwriters therefor reasonably requests;

(xviii) use its commercially reasonable efforts to cause all Registrable Securities to be listed on any national securities exchange;

(xix) otherwise comply with all applicable rules and regulations of the Commission and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and

(xx) cooperate and assist in any filings required to be made with the FINRA and in the performance of any due diligence investigation by any Underwriter and its counsel (including any “qualified independent Underwriter” that is required to be retained in accordance with the rules and regulations of the FINRA).

 

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The Company may (as a condition to a Holder’s participation in a Registration) require each Holder of Registrable Securities to furnish to the Company such information regarding the Holders and the proposed distribution by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing.

Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event or the discovery of any facts of the type described in Section 4(a)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement relating to such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4(a)(x) hereof, or until such Holder is advised in writing by the Company that the use of the Registration Statement may be resumed, and, if so directed by the Company, such Holder will deliver to the Company (at the Company’s expense) all copies in such Holder’s possession, other than permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

Section 5. Indemnification .

(a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each Holder, and the respective officers, directors, partners, trustees, executors, employees, representatives and agents of any such Person, and each Person (a “ Controlling Person ”), if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) any of the foregoing Persons, as follows:

(i) against any and all loss, liability, claim, damage, judgment, actions, other liabilities and expense whatsoever (the “ Liabilities ”), as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment or supplement thereto) pursuant to which Registrable Securities were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom at such date of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(ii) against any and all Liabilities, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided , that (subject to Section 5(d) below) any such settlement is effected with the written consent of the Company; and

(iii) against any and all expense whatsoever, as incurred (including the fees at standard non-premium rates and disbursements of counsel chosen by any indemnified party), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above;

 

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provided , however , that this indemnity and hold harmless agreement shall not apply to any Liabilities to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in a Registration Statement (or any amendment thereto) or any prospectus (or any amendment or supplement thereto). Such indemnity and hold harmless agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the Holders or any such Controlling Person and shall survive the transfer of such securities by the Holders.

(b) Indemnification by the Holders . Each Holder severally (based on the number of its Registrable Securities registered pursuant to this Agreement), but not jointly, agrees to indemnify and hold harmless the Company and the other selling Holders, and each of their respective officers, directors, partners, employees, trustees, executors, representatives and agents, and each of their respective Controlling Persons, against any and all Liabilities described in the indemnity contained in Section 5(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto) or any prospectus included therein (or any amendment or supplement thereto) in reliance upon and in conformity with written information with respect to such Holder furnished to the Company by such Holder expressly for use in the Registration Statement (or any amendment thereto) or such prospectus (or any amendment or supplement thereto); provided , however , that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Registration Statement.

(c) Notices of Claims, etc. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity and hold harmless agreement. An indemnifying party may participate at its own expense in the defense of such action; provided , however , that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. Subject to Section 5(d) below, no indemnifying party shall be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the indemnifying party shall indemnify and hold harmless such indemnified parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whosoever in respect of which indemnification or contribution could be sought under this Section 5 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

 

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(d) Indemnification Payments . If at any time an indemnified party shall have requested an indemnifying party consent to any settlement of the nature contemplated by Sections   5(a)(ii) or 5(c) , such indemnifying party agrees that it shall be liable for such settlement, including any such related fees and expenses of counsel, effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request; (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into; and (iii) such indemnifying party shall not have responded to such indemnified party in accordance with such request prior to the date of such settlement.

(e) Contribution . If the indemnification provided for in this Section 5 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any Liabilities referred to therein, then each indemnifying party shall contribute to the aggregate amount of such Liabilities incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Holders on the other hand in connection with the statements or omissions which resulted in such Liabilities, as well as any other relevant equitable considerations; provided , however , that no Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Registration Statement.

The relative fault of the Company on the one hand and the Holders on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Holders and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 5 . The aggregate amount of Liabilities incurred by an indemnified party and referred to above in this Section 5 shall be deemed to include any such legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

Section 6. Market Stand-Off Agreement . Each Holder hereby agrees that it shall not, directly or indirectly sell, offer to sell (including without limitation any short sale), pledge, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any Registrable Securities or other Class A Common Stock or any securities convertible into or exchangeable or exercisable for Class A Common Stock then owned by such Holder (other than to permitted transferees of the Holders who agree to be similarly bound) for up to 90 days following the date of an underwriting agreement with respect to an underwritten public offering of the Company’s securities as requested by the managing underwriter of such Underwritten Offering; provided , however , that:

(a) the restrictions above shall not apply to Registrable Securities sold on the Holders’ behalf to the public in an Underwritten Offering pursuant to a Registration Statement;

 

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(b) all officers and directors of the Company then holding Class A Common Stock or securities convertible into or exchangeable or exercisable for Class A Common Stock enter into similar agreements for not less than the entire time period required of the Holders hereunder; and

(c) the Holders shall be allowed any concession or proportionate release allowed to any (i) officer, (ii) director, (iii) other holder of the Company’s Class A Common Stock that entered into similar agreements (with such proportion being determined by dividing the number of shares being released with respect to such officer, director or other holder of the Company’s Class A Common Stock by the total number of issued and outstanding shares held by such officer, director or holder).

In order to enforce the foregoing covenant, the Company shall have the right to place restrictive legends on the certificates representing the securities subject to this Section 6 and to impose stop transfer instructions with respect to the Registrable Securities and such other securities of each Holder (and the securities of every other Person subject to the foregoing restriction) or to assign a different CUSIP number therefor until the end of such period.

Section 7. Termination; Survival . The rights of each Holder under this Agreement shall terminate upon the date that such Holder ceases to hold any Registrable Securities and with respect to the Company upon the end of the Shelf Effectiveness Period with respect to any Shelf Registration Statement. Notwithstanding the foregoing, the obligations of the parties under Sections 5 and 8 of this Agreement shall remain in full force and effect following such time.

Section 8. Miscellaneous .

(a) Registration Expenses . The Company shall pay all expenses incident to the performance by the Company of its registration obligations under Section 2 above, including, without limitation, (i) all expenses incurred in connection with the preparation, printing and distribution of any Registration Statement and prospectus and all amendments and supplements thereto, (ii) all stock exchange, Commission and state securities registration, listing and filing fees, (iii) all fees and expenses of complying with securities or “blue sky” laws, (iv) all FINRA fees, (v) fees and disbursements of counsel for the Company and fees and expenses for the independent certified public accountants retained by the Company (including the expenses or costs associated with the delivery of any opinions or comfort letters), (vi) all internal expenses of the Company (including, without limitation, all salaries and expenses of its officers performing legal or accounting duties); and (vii) the fees and expenses of any person, including special experts, retained by the Company in connection with the preparation of any Registration Statement. Except as required in this Section 8, the Company shall have no obligation to pay (i) any fees, discounts or commissions attributable to the sale of Registrable Securities; (ii) any Holder’s out-of-pocket expenses relating to the transactions contemplated by this Agreement; or (iii) any transfer taxes relating to the registration for sale of the Registrable Securities.

(b) Covenants Relating To Rule 144 . For so long as the Company is subject to the reporting requirements of Section 13 or 15 of the Exchange Act, the Company covenants that it will file the reports required to be filed by it under the Securities Act and Section 13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the Commission thereunder. If the Company ceases to be so required to file such reports, the Company covenants that it will upon the request of any Holder of Registrable Securities (a) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the Securities Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the Securities Act and it will take such further action as any Holder of Registrable Securities may reasonably request, and (c) take such further action that is reasonable in the circumstances, in each case to the extent required from time to time to enable such Holder to sell its Registrable Securities without registration under the Securities Act within the

 

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limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, (ii) Rule 144A under the Securities Act, as such rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the Commission. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements (at any time after 90 days after the effective date of the first Registration Statement filed by the Company for an offering of its Class A Common Stock to the general public) and of the Securities Act and the Exchange Act (at any time after it has become subject to the reporting requirements of the Exchange Act), a copy of the most recent annual and quarterly report(s) of the Company, and such other reports, documents or stockholder communications of the Company, and take such further actions consistent with this Section 8(b) , as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such Registrable Securities without registration.

(c) Participation in Underwritten Offerings . No Person may participate in any Underwritten Offerings hereunder unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these registration rights provided for in this Agreement. Except as provided in the Consolidation Registration Rights Agreement, the Company shall select the managing Underwriter or Underwriters in connection with any Underwritten Offering.

(d) No Inconsistent Agreements . The Company has not entered into and the Company will not after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities pursuant to this Agreement or otherwise conflicts with the provisions of this Agreement. The rights granted to the Holders hereunder do not and will not for the term of this Agreement in any way conflict with the rights granted to the holders of the Company’s other issued and outstanding securities under any such agreements.

(e) Amendments and Waivers . The provisions of this Agreement may be amended or waived at any time only by the written agreement of the Company and the Holders of a majority of the Registrable Securities; provided , however , that the provisions of this Agreement may not be amended or waived without the consent of each Holder of Registrable Securities adversely affected by such amendment or waiver if such amendment or waiver adversely affects a portion of the Registrable Securities but does not so adversely affect all of the Registrable Securities; provided , further , that the provisions of the preceding provision may not be amended or waived except in accordance with this sentence. Any waiver, permit, consent or approval of any kind or character on the part of any such Holder of any provision or condition of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in writing. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Holder of Registrable Securities and the Company.

(f) Notices . All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, facsimile or any courier guaranteeing overnight delivery.

 

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If to the Company, to:

Empire State Realty Trust, Inc.

One Grand Central Place

60 E. 42 nd Street

New York, New York 10165

Attention: Thomas N. Keltner, Jr.

Fax No.: 212-983-1385

Clifford Chance US LLP

31 West 52 nd Street

60 E. 42 nd Street

New York, New York 10019

Attention: Larry P. Medvinsky

Fax No.: 212-878-8375

If to the Holder:

To the address indicated on the books and records of the Company’s transfer agent.

If to a transferee Holder, to the address of such Holder set forth in the transfer documentation provided to the Company.

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; two (2) Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged, if sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) and on the next Business Day if timely delivered to an air courier guaranteeing overnight delivery.

(g) Successor and Assigns . This Agreement and the rights, duties and obligations of the Holders hereunder may be freely assigned or delegated by such Holder in conjunction with and to the extent of any transfer of Registrable Securities held by any such Holder. This Agreement and the provisions hereof shall inure to the benefit of and be binding upon all of the parties hereto and their respective heirs, executors, personal and legal representatives, successors and permitted assigns, including, without limitation, any successor of the Company by merger, acquisition, reorganization, recapitalization or otherwise; provided , however , that no such transfer or assignment shall be binding upon or obligate the Company to any such assignee unless and until the Company shall have received written notice of such transfer or assignment as herein provided and a written agreement of the assignee to be bound by the provisions of this Agreement. This Agreement is not intended to confer any rights or benefits on any Persons that are not party hereto other than as expressly set forth in Section 5 and this Section 8(g) .

(h) Specific Enforcement . Without limiting the remedies available to the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2 hereof may result in material irreparable injury to the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, a Holder may obtain such relief as may be required to specifically enforce the Company’s obligations under Section 2 hereof.

 

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(i) Counterparts . This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(j) Headings . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(k) GOVERNING LAW . THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES.

(l) Severability . In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.

 

EMPIRE STATE REALTY TRUST, INC.
a Maryland corporation
By:  

/s/ Thomas N. Keltner, Jr.

  Name:   /s/ Thomas N. Keltner, Jr.
  Title:   Executive Vice President, General Counsel and Secretary

EXHIBIT 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-191588) pertaining to the Empire State Realty Trust, Inc. Empire State Realty OP, L.P. 2013 Equity Incentive Plan of our reports dated July 21, 2014, with respect to the Statements of Revenues and Certain Expenses of 112 West 34 th Street and 1400 Broadway for the years ended December 31, 2013, 2012 and 2011, included in this Current Report on Form 8-K of Empire State Realty Trust, Inc. dated as of July 15, 2014.

 

/s/ Ernst & Young LLP

New York, New York
July 21, 2014

Exhibit 99.1

 

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EMPIRE STATE REALTY TRUST COMPLETES ACQUISITION OF INTERESTS IN TWO MANHATTAN PROPERTIES

- Expands Manhattan Portfolio by 1.64 Million Square Feet or 26.0% -

New York, New York, July 16, 2014 - Empire State Realty Trust, Inc. (NYSE: ESRT) (the “Company”), a leading real estate investment trust with office and retail properties in Manhattan and the greater New York metropolitan area, today announced that it has completed the acquisition of the ground and operating leases at 112 West 34th Street and the ground lease at 1400 Broadway for a total of approximately $734 million in cash, common stock and operating partnership (“OP”) units.

The leaseholds and fee title to a small contiguous property at 112 West 34th Street were acquired for approximately $423.6 million, or approximately $570 per square foot, consisting of $87.7 million by assumption of existing mortgage debt, $106.8 million in cash and $229.1 million in shares of Class A and Class B common stock and Series PR OP units. The leasehold at 1400 Broadway was acquired for $310.0 million, or approximately $346 per square foot, consisting of $80.0 million by assumption of existing mortgage debt, $79.7 million in cash, and $150.3 million in shares of Class A and Class B common stock and Series PR OP units. In connection with these transactions, the Company issued 2.7 million shares of Class A and Class B common stock at a per share price of $16.65 and 20.1 million Series PR OP Units at a unit price of $16.65.

Anthony E. Malkin, Chairman, President and CEO of Empire State Realty Trust, said, “Our acquisition of these high-quality midtown office properties represents an excellent opportunity to enhance shareholder value. Their redevelopment programs are well underway, and we believe there is excellent upside in the re-leasing of the office and retail space at both properties that we expect to capture over time.”

112 West 34th Street is a 26-story, 650,769 rentable square foot office tower, with 92,455 square feet of retail space located in the 34th Street/Penn Station submarket. An 89,529 square foot block of retail space located directly across from Macy’s (NYSE: M) flagship location is currently being marketed for occupancy in mid-2016. The property’s office and retail space is 77.5% occupied and 83.2% leased, as of June 30, 2014. 1400 Broadway is a 37-story 880,131 rentable square foot office tower with 19,815 square feet of retail space, located in the Times Square South submarket, and the property’s office and retail space is 92.6% occupied and 92.7% leased, as of June 30, 2014. Both properties are convenient to Penn Station, Grand Central Terminal, Port Authority Bus Terminal, PATH and 13 subway lines. In addition, both properties have recently received significant capital investment.

About Empire State Realty Trust

Empire State Realty Trust, Inc. (NYSE: ESRT), a leading real estate investment trust (REIT), owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the world’s most famous office building. Headquartered in New York, New York, the Company’s office and retail portfolio covers 10.0 million rentable square feet, as of July 15, 2014, consisting of 9.3 million rentable square feet in 14 office properties, including nine in Manhattan, three in Fairfield County, Connecticut and two in Westchester


LOGO

 

County, New York; and approximately 732,000 rentable square feet in the retail portfolio. The Company also owns land at the Stamford, Connecticut Transportation Center that supports the development of an approximately 380,000 rentable square foot office building and garage

Forward-Looking Statements

This press release includes “forward looking statements”. Forward-looking statements may be identified by the use of words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates,” “contemplates,” “aims,” “continues,” “would” or “anticipates” or the negative of these words and phrases or similar words or phrases. 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: the factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, including those set forth under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and “Properties.” While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise 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 press release, except as required by applicable law. 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Prospective investors should not place undue reliance on any forward-looking statements, which are based only on information currently available to the Company (or to third parties making the forward-looking statements).

Contact:

Investors

Empire State Realty Trust Investor Relations

(212) 850-2678

IR@empirestaterealtytrust.com

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