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Capital | 9 Months Ended
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Sep. 30, 2021
Equity [Abstract] |
Capital | Capital As of September 30, 2021, there were 285,104,512 common stock and operating partnership units outstanding, of which 173,292,301, or 60.8%, were owned by ESRT and 111,812,211, or 39.2%, 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 ESRT and the 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 ESRT common stock is 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 Series PR 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 operating partnership units, which equal per share dividends (both regular and special) on our common stock. LTIP units subject to market-based vesting 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. Stock and Publicly Traded Operating Partnership Unit Repurchase Program ESRT's Board of Directors reauthorized the repurchase of up to $500 million of ESRT Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units through December 31, 2021. Under the program, ESRT may purchase ESRT Class A common stock and we may purchase our Series ES, Series 250 and Series 60 operating partnership units in accordance with applicable securities laws from time to time in the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will be determined by ESRT and us at our discretion and will be subject to stock price, availability, trading volume and general market conditions. The authorization does not obligate ESRT or us to acquire any particular amount of securities, and the program may be suspended or discontinued at ESRT and our discretion without prior notice. The following table summarizes ESRT's purchases of equity securities in each of the three months ended September 30, 2021:
Period | Total Number of Shares Purchased |  | Weighted Average Price Paid per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plan |  | Maximum Approximate Dollar Value Available for Future Purchase (in thousands)
July 2021 | — |  |  | $ | — |  |  | — |  |  | $ | 496,467 |
August 2021 | 403,831 |  |  | $ | 10.54 |  |  | 403,831 |  |  | $ | 492,212 |
September 2021 | 221,771 |  |  | $ | 10.17 |  |  | 221,771 |  |  | $ | 489,958 |
Private Perpetual Preferred Units As of September 30, 2021, there were 4,664,038 Series 2019 Preferred Units ("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 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 Total distributions paid to OP unitholders were $10.0 million and $19.4 million for the three and nine months ended September 30, 2021, respectively, and $0.0 million and $62.2 million for the three and nine months ended September 30, 2020, respectively. Total distributions paid to preferred unitholders were $1.1 million and $3.2 million for the three and nine months ended September 30, 2021, respectively, and $1.1 million and $3.1 million for the three and nine months ended September 30, 2020, 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 is authorized for issuance under awards granted pursuant to the 2019 Plan, and as of September 30, 2021, 7.7 million shares of ESRT common stock remain available for future issuance. In August 2021, we granted LTIP units under the 2019 Plan to Christina Chiu, our Executive Vice President and Chief Financial Officer, consisting of 8,772 LTIP units that are subject to time-based vesting and 26,930 LTIP units that are subject to market-based vesting, with fair market values of $0.075 million for the time-based vesting awards and $0.15 million for the market-based vesting awards. The awards subject to time-based vesting vest ratably over four years from January 1, 2021, subject generally to her continued employment. The first installment vests on January 1, 2022 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, 2021. Following the completion of the three-year performance period, our compensation and human capital committee will determine the number of LTIP units to which she is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreement entered into in connection with the award grant. These units then vest in two installments, with the first installment vesting on January 1, 2024 and the second installment vesting on January 1, 2025, subject generally to her continued employment on those dates. 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, four or five 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 65 and (ii) the date on which the employee has first completed ten years of continuous service with us or our affiliates. During the second quarter of 2020, the Board approved changing the definition of retirement age from 60 to 65 starting with the grant awards issued in March 2020 under the 2019 Plan. 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 and 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. 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, 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 nine months ended September 30, 2021 were valued at $20.0 million. The weighted average per unit or share fair value was $8.52 for grants issued in 2021. The per unit or share granted in 2021 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 2.60%, a risk-free interest rate from 0.12% to 0.32%, and an expected price volatility from 36.0% to 53.0%. No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding in 2021. The following is a summary of ESRT restricted stock and LTIP unit activity for the nine months ended September 30, 2021:
| Restricted Stock |  | LTIP Units |  | Weighted Average Grant Fair Value
Unvested balance at December 31, 2020 | 217,700 |  |  | 7,750,284 |  |  | $ | 6.94 |
Vested | (71,944) |  |  | (992,776) |  |  | 11.53 |
Granted | 123,359 |  |  | 2,230,579 |  |  | 8.52 |
Forfeited or unearned | (41,950) |  |  | (1,449,361) |  |  | 5.67 |
Unvested balance at September 30, 2021 | 227,165 |  |  | 7,538,726 |  |  | $ | 7.03 |
The LTIP unit and ESRT restricted stock awards are treated for accounting purposes as immediately vested upon the later of (i) the date the grantee attains the age of 60 or 65, as applicable, 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 $0.7 million and $2.1 million for the three and nine months ended September 30, 2021, respectively, and $0.4 million and $2.3 million for the three and nine months ended September 30, 2020, respectively. Unrecognized compensation expense was $2.3 million at September 30, 2021, which will be recognized over a weighted average period of 2.5 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 noncash compensation expense of $4.7 million and $13.3 million for the three and nine months ended September 30, 2021, respectively, and $5.1 million and $17.9 million for the three and nine months ended September 30, 2020, respectively. Unrecognized compensation expense was $28.1 million at September 30, 2021, which will be recognized over a weighted average period of 2.4 years. Earnings Per Unit Earnings per unit for the three and nine months ended September 30, 2021 and 2020 is computed as follows (amounts in thousands, except per share amounts):
| Three Months Ended |  | Nine Months Ended
| September 30, 2021 |  | September 30, 2020 |  | September 30, 2021 |  | September 30, 2020
Numerator: |  |  |  |  |  |  |
Net loss | $ | (10,183) |  |  | $ | (12,269) |  |  | $ | (8,963) |  |  | $ | (23,599) |
Private perpetual preferred unit distributions | (1,050) |  |  | (1,050) |  |  | (3,151) |  |  | (3,147) |
Earnings allocated to unvested units | (114) |  |  | (342) |  |  | (227) |  |  | (985) |
Net loss attributable to common unitholders – basic and diluted | $ | (11,347) |  |  | $ | (13,661) |  |  | $ | (12,341) |  |  | $ | (27,731) |
Denominator: |  |  |  |  |  |  |
Weighted average units outstanding – basic | 277,716 |  |  | 280,940 |  |  | 277,829 |  |  | 285,640 |
Effect of dilutive securities: |  |  |  |  |  |  |
Stock-based compensation plans | — |  |  | — |  |  | — |  |  | — |
Weighted average units outstanding –- diluted | 277,716 |  |  | 280,940 |  |  | 277,829 |  |  | 285,640 |
Earnings per share: |  |  |  |  |  |  |
Basic | $ | (0.04) |  |  | $ | (0.05) |  |  | $ | (0.04) |  |  | $ | (0.10) |
Diluted | $ | (0.04) |  |  | $ | (0.05) |  |  | $ | (0.04) |  |  | $ | (0.10) |
There were 1,084,264 and 997,811 antidilutive shares and LTIP units for the three and nine months ended September 30, 2021, respectively, and zero and 169,848 antidilutive shares and LTIP units for the three and nine months ended September 30, 2020, respectively

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