Deferred Costs, Acquired Lease Intangibles and Goodwill

9 Months Ended

Sep. 30, 2022

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

Deferred Costs, Acquired Lease Intangibles and Goodwill

Deferred Costs, Acquired Lease Intangibles and Goodwill Deferred costs, net, consisted of the following as of September 30, 2022 and December 31, 2021 (amounts in thousands):


	September 30, 2022		December 31, 2021
Leasing costs	$	218,552	$	211,189
Acquired in-place lease value and deferred leasing costs	158,286		166,491
Acquired above-market leases	28,123		33,289
	404,961		410,969
Less: accumulated amortization	(221,751)		(215,764)
Total deferred costs, net, excluding net deferred financing costs	$	183,210	$	195,205

At September 30, 2022 and December 31, 2021, $5.5 million and $7.2 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 sheets.

Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $5.6 million and $10.4 million for the three months ended September 30, 2022 and 2021, respectively, and $19.8 million and $22.1 million for the nine months ended September 30, 2022 and 2021, respectively. Amortization expense related to acquired lease intangibles was $2.2 million and $5.0 million for the three months ended September 30, 2022 and 2021, respectively, and $10.6 million and $8.3 million for the nine months ended September 30, 2022 and 2021, respectively.

Amortizing acquired intangible assets and liabilities consisted of the following as of September 30, 2022 and December 31, 2021 (amounts in thousands):


	September 30, 2022		December 31, 2021
Acquired below-market ground leases	$	396,916	$	396,916
Less: accumulated amortization	(65,886)		(60,012)
Acquired below-market ground leases, net	$	331,030	$	336,904


	September 30, 2022		December 31, 2021
Acquired below-market leases	$	(64,529)	$	(65,403)
Less: accumulated amortization	45,632		40,462
Acquired below-market leases, net	$	(18,897)	$	(24,941)

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $0.7 million and $4.2 million for the three months ended September 30, 2022 and 2021, respectively, and $4.1 million and $5.6 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, 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 reportable segment.

From the quarter ended June 30, 2020 through the quarter ended June 30, 2022, we bypassed the optional qualitative goodwill impairment assessment and proceeded directly to a quantitative assessment of the observatory reportable segment and engaged a third-party valuation consulting firm to perform the valuation process. This was done in response to the closure of the observatory on March 16, 2020, due to the COVID-19 pandemic, which was subsequently fully reopened on August 24, 2020. The quantitative analysis used a combination of the discounted cash flow method (a form of the income approach) utilizing Level 3 unobservable inputs and the guideline company method (a form of the market approach). Significant assumptions under the former included revenue and cost projections, weighted average cost of capital, long-term growth rate and income tax considerations while the latter included guideline company enterprise values, revenue multiples and control premium rates. Our methodology to review goodwill impairment, which included a significant amount of judgment and estimates, provided a reasonable basis to determine whether impairment had occurred. Each quantitative analysis performed concluded the fair value of the reporting unit exceeds its carrying value. For the quarter ended September 30, 2022, we performed an optional qualitative assessment and did not identify any events which occurred between our last quantitative assessment and the current reporting date which would indicate, on a more likely than not basis, that the goodwill allocated to the reporting unit was impaired. 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.