XML 29 R18.htm IDEA: XBRL DOCUMENT v3.20.2
Segment Reporting
 9 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
Segment Reporting Segment Reporting
We have identified two reportable segments: (1) real estate and (2) observatory. Our real estate segment includes all activities related to the ownership, management, operation, acquisition, redevelopment, repositioning and disposition of our traditional real estate assets. Our observatory segment includes the operation of the 86th and 102nd floor observatories at the Empire State Building. These two lines of businesses are managed separately because each business requires different support infrastructures, provides different services and has dissimilar economic characteristics such as investments needed, stream of revenues and marketing strategies. We account for intersegment sales and rent as if the sales or rent were to third parties, that is, at current market prices.
The following tables provide components of segment profit for each segment for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):

 
 
Three Months Ended September 30, 2020
 
 
Real Estate
 
Observatory
 
Intersegment Elimination
 
Total
Revenues:
 
 
 
 
 
 
 
 
Rental revenue
 
$
139,909

 
$
—

 
$
—

 
$
139,909

Intercompany rental revenue
 
(2,233
)
 
—

 
2,233

 
—

Observatory revenue
 
—

 
4,419

 
—

 
4,419

Lease termination fees
 
331

 
—

 
—

 
331

Third-party management and other fees
 
283

 
—

 
—

 
283

Other revenue and fees
 
1,633

 
—

 
—

 
1,633

Total revenues
 
139,923

 
4,419

 
2,233

 
146,575

Operating expenses:
 
 
 
 
 
 
 
 
Property operating expenses
 
33,836

 
—

 
—

 
33,836

Intercompany rent expense
 
—

 
(2,233
)
 
2,233

 
—

Ground rent expense
 
2,331

 
—

 
—

 
2,331

General and administrative expenses
 
14,517

 
—

 
—

 
14,517

Observatory expenses
 
—

 
5,931

 
—

 
5,931

Real estate taxes
 
31,196

 
—

 
—

 
31,196

Impairment charge
 
2,103

 
—

 
—

 
2,103

Depreciation and amortization
 
44,679

 
54

 
—

 
44,733

Total operating expenses
 
128,662

 
3,752

 
2,233

 
134,647

Total operating income (loss)
 
11,261

 
667

 
—

 
11,928

Other income (expense):

 
 
 
 
 
 
 
 
Interest income
 
360

 
6

 
—

 
366

Interest expense
 
(23,360
)
 
—

 
—

 
(23,360
)
Loss on early extinguishment of debt

 
—

 
—

 
—

 
—

IPO litigation expense
 
(1,165
)
 
—

 
—

 
(1,165
)
Income (loss) before income taxes
 
(12,904
)
 
673

 
—

 
(12,231
)
Income tax (expense) benefit
 
(196
)
 
158

 
—

 
(38
)
Net income (loss)
 
$
(13,100
)
 
$
831

 
$
—

 
$
(12,269
)
Segment assets
 
$
3,771,476

 
$
239,238

 
$
—

 
$
4,010,714

Expenditures for segment assets
 
$
30,831

 
$
516

 
$
—

 
$
31,347




 
 
Three Months Ended September 30, 2019
 
 
Real Estate
 
Observatory
 
Intersegment Elimination
 
Total
Revenues:
 
 
 
 
 
 
 
 
Rental revenue
 
$
150,225

 
$
—

 
$
—

 
$
150,225

Intercompany rental revenue
 
23,242

 
—

 
(23,242
)
 
—

Observatory revenue
 
—

 
37,575

 
—

 
37,575

Lease termination fees
 
2,361

 
—

 
—

 
2,361

Third-party management and other fees
 
304

 
—

 
—

 
304

Other revenue and fees
 
2,408

 
—

 
—

 
2,408

Total revenues
 
178,540

 
37,575

 
(23,242
)
 
192,873

Operating expenses:
 
 
 
 
 
 
 
 
Property operating expenses
 
47,894

 
—

 
—

 
47,894

Intercompany rent expense
 
—

 
23,242

 
(23,242
)
 
—

Ground rent expense
 
2,331

 
—

 
—

 
2,331

General and administrative expenses
 
14,421

 
—

 
—

 
14,421

Observatory expenses
 
—

 
9,089

 
—

 
9,089

Real estate taxes
 
29,599

 
—

 
—

 
29,599

Depreciation and amortization
 
44,253

 
7

 
—

 
44,260

Total operating expenses
 
138,498

 
32,338

 
(23,242
)
 
147,594

Total operating income
 
40,042

 
5,237

 
—

 
45,279

Other income (expense):
 
 
 
 
 
 
 
 
Interest income
 
2,269

 
—

 
—

 
2,269

Interest expense
 
(19,426
)
 
—

 
—

 
(19,426
)
Income before income taxes
 
22,885

 
5,237

 
—

 
28,122

Income tax expense
 
(267
)
 
(1,071
)
 
—

 
(1,338
)
Net income
 
$
22,618

 
$
4,166

 
$
—

 
$
26,784

Segment assets
 
$
3,659,592

 
$
265,725

 
$
—

 
$
3,925,317

Expenditures for segment assets
 
$
42,901

 
$
18,375

 
$
—

 
$
61,276

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2020
 
 
Real Estate
 
Observatory
 
Intersegment Elimination
 
Total
Revenues:
 
 
 
 
 
 
 
 
Rental revenue
 
$
426,021

 
$
—

 
$
—

 
$
426,021

Intercompany rental revenue
 
13,356

 
—

 
(13,356
)
 
—

Observatory revenue
 
—

 
24,049

 
—

 
24,049

Lease termination fees
 
1,575

 
—

 
—

 
1,575

Third-party management and other fees
 
930

 
—

 
—

 
930

Other revenue and fees
 
5,254

 
—

 
—

 
5,254

Total revenues
 
447,136

 
24,049

 
(13,356
)
 
457,829

Operating expenses:
 
 
 
 
 
 
 
 
Property operating expenses
 
105,054

 
—

 
—

 
105,054

Intercompany rent expense
 
—

 
13,356

 
(13,356
)
 
—

Ground rent expense
 
6,994

 
—

 
—

 
6,994

General and administrative expenses
 
48,617

 
—

 
—

 
48,617

Observatory expenses
 
—

 
18,087

 
—

 
18,087

Real estate taxes
 
90,029

 
—

 
—

 
90,029

Impairment charges
 
6,204

 
—

 
—

 
6,204

Depreciation and amortization
 
143,522

 
87

 
—

 
143,609

Total operating expenses
 
400,420

 
31,530

 
(13,356
)
 
418,594

Total operating income (loss)
 
46,716

 
(7,481
)
 
—

 
39,235

Other income (expense):
 
 
 
 
 
 
 
 
Interest income
 
2,438

 
91

 
—

 
2,529

Interest expense
 
(66,906
)
 
—

 
—

 
(66,906
)
Loss on early extinguishment of debt

 
(86
)
 
—

 
—

 
(86
)
IPO litigation expense
 
(1,165
)
 
—

 
—

 
(1,165
)
Loss before income taxes
 
(19,003
)
 
(7,390
)
 
—

 
(26,393
)
Income tax (expense) benefit
 
(692
)
 
3,486

 
—

 
2,794

Net loss
 
$
(19,695
)
 
$
(3,904
)
 
$
—

 
$
(23,599
)
Expenditures for segment assets
 
$
77,503

 
$
2,748

 
$
—

 
$
80,251

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2019
 
 
Real Estate
 
Observatory
 
Intersegment Elimination
 
Total
Revenues:
 
 
 
 
 
 
 
 
Rental revenue
 
$
434,713

 
$
—

 
$
—

 
$
434,713

Intercompany rental revenue
 
58,754

 
—

 
(58,754
)
 
—

Observatory revenue
 
—

 
91,039

 
—

 
91,039

Lease termination fees
 
3,112

 
—

 
—

 
3,112

Third-party management and other fees
 
955

 
—

 
—

 
955

Other revenue and fees
 
6,591

 
—

 
—

 
6,591

Total revenues
 
504,125

 
91,039

 
(58,754
)
 
536,410

Operating expenses:
 
 
 
 
 
 
 
 
Property operating expenses
 
131,076

 
—

 
—

 
131,076

Intercompany rent expense
 
—

 
58,754

 
(58,754
)
 
—

Ground rent expense
 
6,994

 
—

 
—

 
6,994

General and administrative expenses
 
44,445

 
—

 
—

 
44,445

Observatory expenses
 
—

 
25,024

 
—

 
25,024

Real estate taxes
 
86,098

 
—

 
—

 
86,098

Depreciation and amortization
 
135,157

 
22

 
—

 
135,179

Total operating expenses
 
403,770

 
83,800

 
(58,754
)
 
428,816

Total operating income
 
100,355

 
7,239

 
—

 
107,594

Other income (expense):
 
 
 
 
 
 
 
 
Interest income
 
9,907

 
—

 
—

 
9,907

Interest expense
 
(60,712
)
 
—

 
—

 
(60,712
)
Income before income taxes
 
49,550

 
7,239

 
—

 
56,789

Income tax expense
 
(762
)
 
(457
)
 
—

 
(1,219
)
Net income
 
$
48,788

 
$
6,782

 
$
—

 
$
55,570

Expenditures for segment assets
 
$
134,865

 
$
46,703

 
$
—

 
$
181,568


During the second quarter 2020, we wrote-off $4.1 million of prior expenditures on a potential energy efficiency project in our real estate segment that is not economically feasible in today's regulatory environment. During the third quarter 2020, we also wrote off $2.1 million of prior expenditures on a build-to-suit development project in our real estate segment that was halted due to reconsideration by the user driven by the COVID-19 pandemic. For the nine months ended September 30, 2020, the total $6.2 million write-off is shown as Impairment charge in the condensed consolidated statements of operations.