Deferred Costs, Acquired Lease Intangibles and Goodwill

9 Months Ended

Sep. 30, 2020

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Deferred Costs, Acquired Lease Intangibles and Goodwill

Deferred costs, net, consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):



	September 30, 2020			December 31, 2019
Leasing costs	$	200,684		$	199,033
Acquired in-place lease value and deferred leasing costs	186,766			200,296
Acquired above-market leases	44,449			49,213
	431,899			448,542
Less: accumulated amortization	(226,802		)	(224,598		)
Total deferred costs, net, excluding net deferred financing costs	$	205,097		$	223,944

At September 30, 2020 and December 31, 2019, $2.7 million and $4.2 million, respectively, of net deferred financing costs associated with the unsecured revolving credit facility was included in deferred costs, net on the condensed consolidated balance sheet.

Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $5.4 million and $6.2 million for the three months ended September 30, 2020 and 2019, respectively, and $17.7 million and $18.3 million for the nine months ended September 30, 2020 and 2019, respectively. Amortization expense related to acquired lease intangibles was $1.5 million and $2.4 million for the three months ended September 30, 2020 and 2019, respectively, and $5.9 million and $8.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Amortizing acquired intangible assets and liabilities consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):



	September 30, 2020			December 31, 2019
Acquired below-market ground leases	$	396,916		$	396,916
Less: accumulated amortization	(50,223		)	(44,350		)
Acquired below-market ground leases, net	$	346,693		$	352,566



	September 30, 2020			December 31, 2019
Acquired below-market leases	$	(82,891	)	$	(100,472	)
Less: accumulated amortization	49,486			60,793
Acquired below-market leases, net	$	(33,405	)	$	(39,679	)

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $0.7 million and $1.7 million for the three months ended September 30, 2020 and 2019, respectively, and $3.0 million and $5.8 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, we had goodwill of $491.5 million. Goodwill was allocated $227.5 million to the observatory reportable segment and $264.0 million to the real estate segment.

In compliance with the requirements of authorities, we closed the Empire State Building Observatory on March 16, 2020 due to the COVID-19 pandemic and it remained closed until the 86th floor observation deck was reopened on July 20, 2020. The 102nd observation deck was reopened on August 24, 2020. The closure of our Observatory and subsequent reopening under international, national, and local travel restrictions and quarantines caused us during the quarter to choose to perform an impairment test related to goodwill. We engaged a third-party valuation consulting firm to perform the valuation process. Based upon the results of the goodwill impairment test of the stand-alone Observatory reporting unit, which is after the intercompany rent expense paid to the Real Estate reporting unit, we determined that the fair value of the Observatory reporting unit exceeded its carrying value by less than 5.0%. Many of the factors employed in determining whether or not goodwill is impaired are outside of our control and it is reasonably likely that assumptions and estimates will change in future periods. We will continue to assess the impairment of the Observatory reporting unit goodwill going forward and that continued assessment may again utilize a third-party valuation consulting firm.