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Capital | 12 Months Ended
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Dec. 31, 2019
Stockholders' Equity Note Disclosure, Disclosure of Compensation Related Costs, Share-based Payments and Earnings Per Share [Abstract] |
Capital | Capital Shares and Units As of December 31, 2019, there were approximately 299.7 million operating partnership units outstanding, of which approximately 181.9 million, or 60.7%, were owned by ESRT and approximately 117.8 million, or 39.3%, were owned by other partners, including ESRT directors, members of senior management and other employees. On May 16, 2019, the Empire State Realty Trust, Inc. Empire State Realty OP, L.P. 2019 Equity Incentive Plan (“2019 Plan”) was approved by our shareholders. The 2019 Plan provides for grants to directors, employees and consultants of our company and operating partnership, including options, restricted stock, restricted stock units, stock appreciation rights, performance awards, dividend equivalents and other equity-based awards. An aggregate of approximately 11.0 million shares of our common stock are authorized for issuance under awards granted pursuant to the 2019 Plan. We will not issue any new equity awards under the First Amended and Restated Empire State Realty Trust, Inc. and Empire State Realty OP, L.P. 2013 Equity Incentive Plan ("2013 Plan", and collectively with the 2019 Plan, "the Plans"). The shares of ESRT Class A common stock underlying any awards under the 2019 Plan and the 2013 Plan that are forfeited, canceled or otherwise terminated, other than by exercise, will be added back to the shares of ESRT Class A common stock available for issuance under the 2019 Plan. Shares tendered or held back upon exercise of a stock option or settlement of an award under the 2019 Plan or the 2013 Plan to cover the exercise price or tax withholding and shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right upon exercise thereof, will not be added back to the shares of ESRT Class A common stock available for issuance under the 2019 Plan. In addition, shares of ESRT Class A common stock repurchased on the open market will not be added back to the shares of ESRT Class A common stock available for issuance under the 2019 Plan. Long-term incentive plan ("LTIP") units are a special class of partnership interests. Each LTIP unit awarded will be deemed equivalent to an award of one share of ESRT stock under the Plans, reducing the availability for other equity awards on a one-for-one basis. The vesting period for LTIP units, if any, will be determined at the time of issuance. Under the terms of the LTIP units, we will revalue for tax purposes its assets upon the occurrence of certain specified events, and any increase in valuation from the time of grant until such event will be allocated first to the holders of LTIP units to equalize the capital accounts of such holders with the capital accounts of unitholders. Subject to any agreed upon exceptions, once vested and having achieved parity with unitholders, LTIP units are convertible into operating partnership units on a one-for-one basis. LTIP units subject to time-based vesting, whether vested or not, receive the same per unit distributions as OP Units, which equal per share dividends (both regular and special) on our common stock. Performance based LTIP units receive 10% of such distributions currently, unless and until such LTIP units are earned based on performance, at which time they will receive the accrued and unpaid 90% and will commence receiving 100% of such distributions thereafter. Private Perpetual Preferred Units During December 2019, we completed an exchange offer whereby we issued 4,610,383 new Series 2019 Private Perpetual Preferred Units ("Series 2019 Preferred Units") in exchange for 4,610,383 OP Units, consisting of 1,632,667 Series ES OP Units, 186,799 Series 250 OP Units, 302,608 Series 60 OP Units and 2,488,309 Series PR OP Units. The OP Units acquired in the exchange offer were retired upon receipt. The Series 2019 Preferred Units were issued in the exchange offer in reliance on the exemption set forth in Section 3(a)(9) of the Securities Act of 1933, as amended, for securities exchanged by an issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange. In connection with the exchange offer, we incurred $0.5 million of costs, which were expensed as incurred and included in general and administrative expenses. As of December 31, 2019, there were 4,610,383 Series 2019 Preferred Units and 1,560,360 Series 2014 Private Perpetual Preferred Units ("Series 2014 Preferred Units"). The Series 2019 Preferred Units have a liquidation preference of $13.52 per unit and are entitled to receive cumulative preferential annual cash distributions of $0.70 per unit payable in arrears on a quarterly basis. The Series 2019 Preferred Units are not redeemable at the option of the holders and are redeemable at our option only in the case of specific defined events. The Series 2014 Preferred Units which have a liquidation preference of $16.62 per unit and which are entitled to receive cumulative preferential annual cash distributions of $0.60 per unit payable in arrears on a quarterly basis. The Series 2014 Preferred Units are not redeemable at the option of the holders and are redeemable at our option only in the case of specific defined events. Distributions The following table summarizes the distributions paid on our operating partnership units for the years ended December 31, 2019, 2018 and 2017:
Record Date |  | Payment Date |  | Amount per Operating Partnership Unit
December 23, 2019 |  | December 31, 2019 |  | $0.105
September 16, 2019 |  | September 30, 2019 |  | $0.105
June 14, 2019 |  | June 28, 2019 |  | $0.105
March 15, 2019 |  | March 29, 2019 |  | $0.105
December 17, 2018 |  | December 31, 2018 |  | $0.105
September 14, 2018 |  | September 28, 2018 |  | $0.105
June 15, 2018 |  | June 29, 2018 |  | $0.105
March 15, 2018 |  | March 30, 2018 |  | $0.105
December 15, 2017 |  | December 29, 2017 |  | $0.105
September 15, 2017 |  | September 29, 2017 |  | $0.105
June 15, 2017 |  | June 30, 2017 |  | $0.105
March 15, 2017 |  | March 31, 2017 |  | $0.105
Total distributions paid to OP unitholders and Preferred unitholders during 2019, 2018 and 2017 totaled $127.8 million, $126.5 million and $127.0 million, respectively. Incentive and Share-Based Compensation The Plans provide for grants to directors, employees and consultants consisting of stock options, restricted stock, dividend equivalents, stock payments, performance shares, LTIP units, stock appreciation rights and other incentive awards. An aggregate of 11.0 million shares of ESRT common stock are authorized for issuance under awards granted pursuant to the 2019 Plan, and as of December 31, 2019, approximately 11.5 million shares of ESRT common stock remain available for future issuance under the Plans. In October and May 2019, we made grants of LTIP units to our non-employee directors under the 2019 Plan. At such times, we granted a total of 76,718 LTIP units that are subject to time-based vesting with fair market values of $1.1 million. The awards vest ratably over three years from the date of the grant, subject generally to the director's continued service on our Board of Directors. In March 2019, we made grants of LTIP units to executive officers under the 2013 Plan. At such time, we granted to executive officers a total of 461,693 LTIP units that are subject to time-based vesting and 1,806,520 LTIP units that are subject to market-based vesting, with fair market values of $6.4 million for the time-based vesting awards and $12.8 million for the market-based vesting awards. In March 2019 we made grants of LTIP units and restricted stock to certain other employees under the 2013 Plan. At such time, we granted to certain other employees a total of 61,432 LTIP units and 69,358 shares of restricted stock that are subject to time-based vesting and 113,383 LTIP units that are subject to market-based vesting, with fair market values of $2.0 million for the time-based vesting awards and $0.9 million for the market-based vesting awards. The awards subject to time-based vesting vest ratably over four years from January 1, 2019, subject generally to the grantee's continued employment. The first installment vests on January 1, 2020 and the remainder will vest thereafter in three equal annual installments. The vesting of the LTIP units subject to market-based vesting is based on the achievement of relative total stockholder return hurdles over a three-year performance period, commencing on January 1, 2019. Following the completion of the three-year performance period, our compensation committee will determine the number of LTIP units to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the award grant. These units then vest in two installments, with the first installment vesting on January 1, 2022 and the second installment vesting on January 1, 2023, subject generally to the grantee's continued employment on those dates. Our named executive officers can elect to receive their annual incentive bonus in any combination of (i) cash or vested LTIP's at the face amount of such bonus or (ii) time-vesting LTIP's which would vest over three years, subject to continued employment, at 125% of such face amount. In March 2019, we made grants of LTIP units to executive officers under the 2013 Plan in connection with the 2018 bonus election program. We granted to executive officers a total of 334,952 LTIP units that are subject to time-based vesting with a fair market value of $4.6 million. Of these LTIP units, 26,056 LTIP units vested immediately on the grant date and 308,896 LTIP units vest ratably over three years from January 1, 2019, subject generally to the grantee's continued employment. The first installment vests on January 1, 2020 and the remainder will vest thereafter in two equal annual installments. In May 2018, we made grants of LTIP units to our non-employee directors under the 2013 Plan. At such time, we granted a total of 65,000 LTIP units that are subject to time-based vesting with fair market values of $1.0 million. The awards vest ratably over three years from the date of the grant, subject generally to the director's continued service on our Board of Directors. In March 2018, we made grants of LTIP units to executive officers under the 2013 Plan. At such time, we granted to executive officers a total of 386,876 LTIP units that are subject to time-based vesting and 1,737,917 LTIP units that are subject to market-based vesting, with fair market values of $6.1 million for the time-based vesting awards and $9.6 million for the market-based vesting awards. In March 2018, we made grants of LTIP units and restricted stock to certain other employees under the 2013 Plan. At such time, we granted to certain other employees a total of 67,449 LTIP units and 39,608 shares of restricted stock that are subject to time-based vesting and 223,950 LTIP units that are subject to market-based vesting, with fair market values of $1.7 million for the time-based vesting awards and $1.1 million for the market-based vesting awards. The awards subject to time-based vesting vest ratably over four years from January 1, 2018, subject generally to the grantee's continued employment. The first installment vests on January 1, 2019 and the remainder will vest thereafter in three equal annual installments. The vesting of the LTIP units subject to market-based vesting is based on the achievement of absolute and relative total stockholder return hurdles over a three-year performance period, commencing on January 1, 2018. Following the completion of the three-year performance period, our compensation committee will determine the number of LTIP units to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the award grant. These units then vest in two installments, with the first installment vesting on January 1, 2021 and the second installment vesting on January 1, 2022, subject generally to the grantee's continued employment on those dates. In 2017, our board of directors determined to reinforce the alignment of our executive officers’ interests with that of stockholders by designing a new bonus election program, under which named executive officers could elect to receive their annual incentive bonus in any combination of (i) cash or vested LTIP's at the face amount of such bonus or (ii) time-vesting LTIP's which would vest over three years, subject to continued employment, at 125% of such face amount. In February 2018, we made grants of LTIP units to executive officers under the 2013 Plan in connection with the 2017 bonus election program. We granted to executive officers a total of 238,609 LTIP units that are subject to time-based vesting with a fair market value $4.0 million. Of these LTIP units, 25,158 LTIP units vested immediately on the grant date and 213,451 LTIP units vest ratably over three years from January 1, 2018, subject generally to the grantee's continued employment. The first installment vests on January 1, 2019 and the remainder will vest thereafter in two equal annual installments. Share-based compensation for time-based equity awards is measured at the fair value of the award on the date of grant and recognized as an expense on a straight-line basis over the shorter of (i) the stated vesting period, which is generally three or four years, or (ii) the period from the date of grant to the date the employee becomes retirement eligible, which may occur upon grant. An employee is retirement eligible when the employee attains the (i) age of 60 and (ii) the date on which the employee has first completed ten years of continuous service with ESRT or its affiliates. Share-based compensation for market-based equity awards is measured at the fair value of the award on the date of grant and recognized as an expense on a straight-line basis over three or four years depending on retirement eligibility. For the market-based LTIP units, the fair value of the awards was estimated using a Monte Carlo Simulation model. Our stock price, along with the prices of the comparative indexes, is assumed to follow the Geometric Brownian Motion Process. Geometric Brownian motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case, the stock price) to vary randomly from its current value and take any value greater than zero. The volatilities of the returns on our stock price and the comparative indexes were estimated based on implied volatilities and historical volatilities using a six-year look-back period. The expected growth rate of the stock prices over the performance period is determined with consideration of the risk free rate as of the grant date. For LTIP unit awards that are time-based, the fair value of the awards was estimated based on the fair value of our stock at the grant date discounted for the restriction period during which the LTIP units cannot be redeemed or transferred and the uncertainty regarding if, and when, the book capital account of the LTIP units will equal that of the common units. For restricted stock awards that are time-based, we estimate the stock compensation expense based on the fair value of the stock at the grant date. LTIP units and ESRT restricted stock issued during the year ended December 31, 2019, 2018 and 2017 were valued at $27.9 million, $23.6 million and $19.4 million, respectively. The weighted-average per unit or share fair value was $9.56, $8.54 and $13.77 for grants issued in 2019, 2018 and 2017, respectively. The per unit or share granted in 2019 was estimated on the respective dates of grant using the following assumptions: an expected life from 2.0 to 5.3 years, a dividend rate of 2.40%, a risk-free interest rate from 2.48% to 2.63%, and an expected price volatility from 17.0% to 22.0%. The per unit or share granted in 2018 was estimated on the respective dates of grant using the following assumptions: an expected life of 2.8 years, a dividend rate of 2.30%, a risk-free interest rate of 2.50%, and an expected price volatility of 20.0%. The per unit or share granted in 2017 was estimated on the respective dates of grant using the following assumptions: an expected life of 2.8 years, a dividend rate of 2.05%, a risk-free interest rate of 1.55% and an expected price volatility of 20.0%. No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding in 2019, 2018 and 2017. The following is a summary of ESRT restricted stock and LTIP unit activity for the year ended December 31, 2019:
| ESRT Restricted Stock |  | LTIP Units |  | Weighted Average Grant Fair Value
Unvested balance at December 31, 2018 | 91,158 |  |  | 5,702,821 |  |  | $ | 9.68 |
Vested | (35,724 | ) |  | (598,402 | ) |  | 15.98 |
Granted | 69,358 |  |  | 2,854,698 |  |  | 9.56 |
Forfeited or unearned | (5,874 | ) |  | (1,972,548 | ) |  | 7.34 |
Unvested balance at December 31, 2019 | 118,918 |  |  | 5,986,569 |  |  | $ | 9.73 |
The total fair value of LTIP units and restricted stock that vested during 2019, 2018 and 2017 was $10.1 million, $7.7 million and $7.6 million, respectively. The LTIP unit and ESRT restricted stock award agreements will immediately vest when a grantee attains the (i) age of 60 and (ii) the date on which grantee has first completed ten years of continuous service with our company or its affiliates. For award agreements that qualify, we recognize noncash compensation expense on the grant date for the time-based awards and ratably over the vesting period for the market-based awards, and accordingly, we recognized $2.0 million, $1.8 million and $1.0 million for the years ended December 31, 2019, 2018 and 2017, respectively. Unrecognized compensation expense was $1.1 million at December 31, 2019, which will be recognized over a weighted average period of 2.2 years. For the remainder of the LTIP unit and ESRT restricted stock awards, we recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $18.8 million, $17.0 million and $13.1 million in noncash compensation expense for the years ended December 31, 2019, 2018 and 2017, respectively. Unrecognized compensation expense was $28.7 million at December 31, 2019, which will be recognized over a weighted average period of 2.1 years. Earnings Per Unit Earnings per unit for the years ended December 31, 2019, 2018 and 2017 is computed as follows (amounts in thousands, except per share amounts):
| For the Year Ended December 31,
| 2019 |  | 2018 |  | 2017
Numerator: |  |  |  |  |
Net income | $ | 84,290 |  |  | $ | 117,253 |  |  | $ | 118,253 |
Private perpetual preferred unit distributions | (1,743 | ) |  | (936 | ) |  | (936 | )
Earnings allocated to unvested shares | (885 | ) |  | (851 | ) |  | (760 | )
Net income attributable to common unitholders - basic and diluted | $ | 81,662 |  |  | $ | 115,466 |  |  | $ | 116,557 |
Denominator: |  |  |  |  |
Weighted average units outstanding - basic | 297,798 |  |  | 297,258 |  |  | 296,455 |
Effect of dilutive securities: |  |  |  |  |
Stock-based compensation plans | — |  |  | 1 |  |  | 775 |
Exchangeable senior notes | — |  |  | — |  |  | 819 |
Weighted average shares outstanding - diluted | 297,798 |  |  | 297,259 |  |  | 298,049 |
Earnings per unit - basic and diluted | $ | 0.27 |  |  | $ | 0.39 |  |  | $ | 0.39 |
There were 416,492, 485,865 and 834,267 antidilutive shares and LTIP units for the years ended December 31, 2019, 2018 and 2017, respectively.

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