FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-827

EMPIRE STATE BUILDING ASSOCIATES L.L.C.

(Exact name of Registrant as specified in its charter)

A New York Limited Liability Company		13-6084254
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

One Grand Central Place
60 East 42nd Street
New York, New York 10165
(Address of principal executive offices)

(212) 687-8700
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
$33,000,000 of Participations in LLC Member Interests

Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ. No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether Registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes o No þ .

Indicate by check mark whether Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large Accelerated Filer o		Accelerated Filer o		Non-Accelerated Filer o		Smaller Reporting Company þ

 

 

PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements.

Empire State Building Associates L.L.C.
(A Limited Liability Company)
Condensed Consolidated Balance Sheets
(Unaudited)

		June 30, 2011				December 31, 2010
Assets
Real Estate:
Building		$	38,933,801			$	38,933,801
Less: Accumulated depreciation			9,193,438				8,694,307
			29,740,363				30,239,494
Building improvements			10,162,577				10,162,577
Less: Accumulated depreciation			541,518				411,235
			9,621,059				9,751,342
Land			21,550,588				21,550,588
Total real estate, net			60,912,010				61,541,424
Cash and cash equivalents			19,139,852				25,318,179
Restricted cash			1,887,996				896,965
Due from Supervisor			324,111				324,111
Other receivables			89,525				92,118
Deferred costs			2,039,477				1,038,603
Due from Sublessee			8,961,815				8,961,815
Other assets			250,000				100,000
Mortgage financing costs, less accumulated amortization of $2,790,351 in 2011 and $2,457,051 in 2010			568,307				901,607
Total assets		$	94,173,093			$	99,174,822

Empire State Building Associates L.L.C.
(A Limited Liability Company)
Condensed Consolidated Balance Sheets
(Unaudited)

		June 30, 2011				December 31, 2010
Liabilities and members’ equity
Liabilities:
Mortgages payable		$	92,000,000			$	92,000,000
Accrued mortgage interest			498,333				514,944
Additional rent due to Sublessee			—				1,888,629
Accrued supervisory fees, to a related party			—				312,500
Accrued expenses			216,775				553,522
Total liabilities			92,715,108				95,269,595
Commitments and contingencies			—				—
Members’ equity (At June 30, 2011 and December 31, 2010, there were 3,300 units (at $10,000 per unit) of participation units outstanding)			1,457,985				3,905,227
Total liabilities and members’ equity		$	94,173,093			$	99,174,822

See notes to condensed consolidated financial statements.

Empire State Building Associates L.L.C.
(A Limited Liability Company)
Condensed Consolidated Statements of Operations
(Unaudited)

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2011				2010				2011				2010
Revenue:
Rent income, from a related party		$	2,021,980			$	2,021,980			$	4,038,275			$	4,038,275
Interest and dividend income			3,261				3,959				4,660				6,379
Total revenue			2,025,241				2,025,939				4,042,935				4,044,654
Expenses:
Interest on mortgages			1,678,262				1,678,261				3,339,912				3,339,912
Supervisory services, to a related party			196,104				39,854				392,209				79,708
Depreciation of building and improvements			314,708				314,708				629,415				629,415
Professional fees and miscellaneous expenses, including amounts paid to a related party			93,586				15,199				183,974				34,977
Total expenses			2,282,660				2,048,022				4,545,510				4,084,012
Net Loss		$	(257,419	)		$	(22,083	)		$	(502,575	)		$	(39,358	)
Loss per $10,000 participation unit, based on 3,300 participation units outstanding during the period		$	(78.01	)		$	(6.69	)		$	(152.30	)		$	(11.93	)
Distributions per $10,000 participation unit consisted of the following:
Income		$	0			$	0			$	0			$	0
Return of capital			294.64				294.64				589.29				1,608.06
Total distributions		$	294.64			$	294.64			$	589.29			$	1,608.06

See notes to condensed consolidated financial statements.

Empire State Building Associates L.L.C.
(A Limited Liability Company)
Condensed Consolidated Statements of Members’ Equity
(Unaudited)

		For the				For the
		Six Months Ended				Year Ended
		June 30, 2011				December 31, 2010
Members’ equity:
January 1, 2011		$	3,905,227
January 1, 2010						$	7,637,435
Add, net income (loss):
January 1, 2011 through June 30, 2011			(502,575	)			-0-
January 1, 2010 through December 31, 2010			-0-				3,519,049
			3,402,652				11,156,484
Less, distributions:
Monthly distributions
January 1, 2011 through June 30, 2011			1,944,667				-0-
January 1, 2010 through December 31, 2010			-0-				3,889,333
Additional distribution on March 2, 2010			-0-				3,361,924
Total distributions			1,944,667				7,251,257
Members’ equity at the end of the period:		$	1,457,985			$	3,905,227

See notes to condensed consolidated financial statements.

Empire State Building Associates L.L.C.
(A Limited Liability Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)

		For the				For the
		Six Months Ended				Six Months Ended
		June 30, 2011				June 30, 2010
Cash flows from operating activities:
Net loss		$	(502,575	)		$	(39,358	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of building and improvements			629,415				629,415
Amortization of mortgage financing costs			333,299				333,301
Changes in operating assets and liabilities:
Change in restricted cash			(991,031	)			(1,171,967	)
Change in other receivables			2,593				60,137
Additional rent due to Sublessee			(1,888,629	)			(2,429,589	)
Accrued mortgage interest			(16,611	)			(16,611	)
Accrued expenses			(336,747	)			—
Accrued supervisory fees, to a related party			(312,500	)			(214,591	)
Net cash used in operating activities			(3,082,786	)			(2,849,263	)
Cash flows from financing activities:
Distributions to Participants			(1,944,667	)			(5,306,591	)
Members’ distributions held by Supervisor			—				(324,111	)
Deferred costs			(1,000,874	)			—
Other assets			(150,000	)			—
Net cash used in financing activities			(3,095,541	)			(5,630,702	)
Net decrease in cash and cash equivalents			(6,178,327	)			(8,479,965	)
Cash and cash equivalents, beginning of period			25,318,179				28,531,544
Cash and cash equivalents, end of period		$	19,139,852			$	20,051,579
Supplemental disclosure of cash flow information:
Cash paid for interest		$	3,023,222			$	3,023,222

See notes to condensed consolidated financial statements.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note A Interim Period Reporting

In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Empire State Building Associates L.L.C. (“Registrant”) reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of Registrant as of June 30, 2011, its results of operations for the three and six months ended June 30, 2011 and 2010 and its cash flows for the six-months ended June 30, 2011 and 2010. The condensed consolidated financial statements include the accounts of Registrant and its wholly-owned limited liability company, Empire State Land Associates L.L.C. All intercompany accounts and transactions have been eliminated in consolidation. Information included in the condensed balance sheet as of December 31, 2010 has been derived from the audited balance sheet included in Registrant’s Form 10-K for the year ended December 31, 2010 (the “10-K”) previously filed with the Securities and Exchange Commission (the “SEC”). Pursuant to rules and regulations of the SEC, certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted from these consolidated financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto and the other information contained in the 10-K. The consolidated results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for any interim period or the full year.

Reclassification

Certain prior year balances have been reclassified to conform with the current period presentation.

Note B Organization

Registrant was originally organized on July 11, 1961 as a general partnership. On October 1, 2001, Registrant converted from a general partnership to a limited liability company under New York law and is now known as Empire State Building Associates L.L.C. The conversion did not change any aspect of the assets and operations of Registrant other than to protect its investors from any future liability to a third party.

Registrant’s members (“Members”) are Peter L. Malkin, Anthony E. Malkin and Thomas N. Keltner, Jr. (collectively, the “Agents”), each of whom also acts as an agent for holders of participations (“Participations”) in their respective member interest in Registrant (the “Participants”).

Note C Purchase of Fee Title to The Empire State Building and Land Thereunder, Mortgage Debt, and Related Depreciation and Amortization

On April 17, 2002, Registrant acquired, through a wholly-owned limited liability company (Empire State Land Associates L.L.C.) the fee title to the building known as the Empire State Building at 350 Fifth Avenue in New York (the “Building”), and the land thereunder (the “Land”) (together, the “Real Estate” or “Property”), at a price of $57,500,000, and obtained a $60,500,000 first mortgage (the “First Mortgage”) with Capital One Bank to finance the acquisition and certain related costs.

The Real Estate is carried in the financial statements at its historical cost of $60,484,389, consisting of $57,500,000 for the purchase price paid to the seller, $752,022 for acquisition costs, and $2,232,367 representing the unamortized balance of the cost of the Master Lease on the date the Real Estate was acquired. The cost of the Land was estimated to be 35.63% of the total cost of the Real Estate, and the Building 64.37%. Under the terms of the contract of sale, the deed contains language to avoid the merger of the fee estate and the leasehold, although on a consolidated financial statement basis Registrant incurred no leasehold rent expense after acquiring the Real Estate.

On July 26, 2011 Registrant closed on a new mortgage loan with HSBC Bank USA (“New Mortgage”) and other participating banks with an initial advance of $159,000,000 to be used to pay and discharge all existing mortgage loans including the First and the Second Mortgages, both of which were repaid, the New Mortgage secured by a lien on the Real Estate and Registrant’s leasehold estate under the Master Lease of the Real Estate, to fund operations and working capital requirements relating to the Property (including for improvements) and certain other general purposes. The First Mortgage was scheduled to mature on May 1, 2012 and required monthly payments of interest only at 6.5% per annum. The First Mortgage was secured by a lien on the Real Estate and Registrant’s leasehold estate under the Master Lease of the Real Estate.

To finance improvements at the Property and costs of the financing, on February 25, 2009 Registrant borrowed $31,500,000 from Signature Bank (the “Second Mortgage”). The Second Mortgage was also scheduled to mature on May 1, 2012 and required monthly payments of interest only at 6.5% per annum. The First Mortgage and Second Mortgage loans aggregating $92,000,000 plus accrued interest and applicable prepayment penalties were prepaid on July 26, 2011 out of proceeds from the new $159,000,000 financing described above.

The estimated fair value of Registrant’s total mortgage debt based upon available market information was $93,947,055 at June 30, 2011.

Restricted cash at June 30, 2011 represents funds in an interest-bearing account held at Capital One Bank pursuant to the terms of the First Mortgage, to be used monthly to satisfy a portion ($166,667) of Registrant’s First Mortgage interest obligation. On March 24, 2011, Registrant deposited an additional $2,000,000 into this restricted account under the same conditions.

The Building and Building improvements are being depreciated on the straight-line basis over their estimated useful lives of 39 years. Mortgage financing costs, totaling $3,358,658, are being amortized ratably over the lives of the respective mortgages. As the mortgages were prepaid on July 26, 2011, the remaining unamortized balance will be written-off in the third quarter of 2011.

Note D Sublease

Registrant does not operate the Building. It subleases the Building to Empire State Building Company L.L.C. (“Sublessee”) pursuant to a net operating sublease (the “Sublease”), which included an initial term which expired on January 4, 1992. The Sublease provided four separate options for Sublessee to renew the term, in each case for an additional 21 years, on the terms of the original Sublease. Such renewals have been exercised by Sublessee (a) on January 30, 1989, for the first renewal period from January 5, 1992 through January 4, 2013 and (b) as of February 11, 2010, for the remaining three renewal periods from January 5, 2013 through January 4, 2076 (the last two such renewals being exercised by Sublessee with Registrant’s consent for early exercise).

Sublessee is required to pay annual basic rent (“Basic Rent”) of $6,018,750 from January 1, 1992 through January 4, 2013 and $5,895,625 from January 5, 2013 through the expiration of all renewal terms. Sublessee is also required to pay Registrant additional rent of 50% of Sublessee’s net operating profit, as defined in the Sublease, in excess of $1,000,000 for each lease year ending December 31 (“Additional Rent”).

In accordance with the 2^nd lease modification dated February 25, 2009, Basic Rent described above has been increased to cover debt service on the $31,500,000 Second Mortgage that closed on February 25, 2009. Basic Rent will be increased to cover debt service on any additional borrowings for improvements and tenanting costs and on any refinancing of such debt so long as the aggregate amount refinanced does not exceed the then existing amount of debt plus refinancing costs. Basic rent will be increased to cover debt service relating to the July 26, 2011 refinancing (see Item 2) to the extent the new mortgage debt exceeds the First Mortgage of $60,500,000.

Due from Sublessee at June 30, 2011 represents advances made to Sublessee for building improvements costs.

Additional Rent and any interest and dividends accumulated thereon are distributed annually after deduction for any additional payment described in Note E below, set-aside of $2,000,000 to satisfy a portion of Registrant’s First Mortgage interest obligation, other expenses and additions to general contingencies management judges to be suitable under the circumstances. For 2010, Sublessee reported net operating profit of $9,222,742; therefore, Additional Rent of $4,111,371 was earned for the year ended December 31, 2010. Registrant recognizes Additional Rent income when earned from the Sublessee at the close of the lease year ending December 31^st; such income is not determinable until Sublessee, pursuant to the Sublease, provides Registrant with a certified operating report from a certified public accountant on the Sublessee’s operation of the Real Estate. The Sublease requires that this report be delivered to Registrant annually within 60 days after the end of each such fiscal year. Accordingly, all Additional Rent income and the additional payment to Supervisor are reflected in the fourth quarter of each year. The Sublease does not provide for the Sublessee to render interim reports to Registrant.

Sublessee is a New York limited liability company in which Peter L. Malkin is a member and entities for Peter L. Malkin’s family members are beneficial owners.

Note E Supervisory Services

Supervisory and other services are provided to Registrant by its supervisor, Malkin Holdings LLC (“Malkin Holdings” or “Supervisor”) (formerly Wien & Malkin LLC), a related party. Beneficial interests in Registrant are held directly or indirectly by one or more persons at Malkin Holdings and/or their family members.

Registrant pays Supervisor for supervisory services and disbursements. The basic fee (the “Basic Payment”) had been payable at the rate of $100,000 per annum, payable $8,333 per month, since inception in 1961. The Agents have approved an increase in such fee in an amount equal to the increase in the Consumer Price Index since such date, resulting in an increase in the Basic Payment to $725,000 per annum effective July 1, 2010. The Basic Payment will be subject to further increase in accordance with any future increase in the Consumer Price Index. The fee is payable (i) not less than $8,333 per month and (ii) the balance out of available reserves from Additional Rent. If Additional Rent is insufficient to pay such balance, any deficiency shall be payable in the next year in which Additional Rent is sufficient. The Agents also approved payment by Registrant, effective July 1, 2010, of the expenses in connection with regular accounting services related to maintenance of Registrant’s books and records. Such expenses were previously paid by Supervisor.

The basic supervisory services provided to Registrant by Supervisor include, but are not limited to, maintaining all of its entity and Participant records, performing physical inspections of the Building, providing or coordinating certain counsel services to Registrant, reviewing insurance coverage, conducting annual supervisory review meetings, receipt of monthly rent from Sublessee, payment of monthly and additional distributions to the Participants, payment of all other disbursements, confirmation of the payment of real estate taxes, active review of financial statements submitted to Registrant by Sublessee and financial statements audited by and tax information prepared by Registrant’s independent registered public accounting firm, and distribution of related materials to the Participants. Supervisor also prepares quarterly, annual and other periodic filings with the SEC and applicable state authorities.

Registrant pays Supervisor for other services at hourly rates.

Pursuant to the fee arrangements described herein, Registrant incurred supervisory service fees of $362,500 for the six month period ended June 30, 2011 plus additional fees totaling $29,708 representing 6% of the annual rent and debt service reductions from which Registrant has benefited. No remuneration was paid during the six-month periods ended June 30, 2011 and 2010 by Registrant to any of the Members.

Supervisor also receives an additional payment equal to 6% of distributions to Participants in Registrant in excess of 9% per annum on their remaining cash investment in Registrant (which remaining cash investment at June 30, 2011 was equal to the Participants’ original cash investment of $33,000,000). For tax purposes, such additional payment is recognized as a profits interest and the Supervisor is treated as a member, all without modifying each Participant’s distributive share of reportable income and cash distributions.

Reference is made to Note D above for a description of the terms of the Sublease between Registrant and Sublessee. The respective interests of the Members in Registrant and in Sublessee arise solely from ownership of their respective Participations in Registrant and, in the case of Peter L. Malkin his participating interest and his family entities’ ownership of member interests in Sublessee. The Members as such receive no extra or special benefit not shared on a pro rata basis with all other Participants in Registrant or members in Sublessee. However, all of the Members hold senior positions at Supervisor (which supervises Registrant and Sublessee) and may, by reason of their positions at Supervisor, receive income attributable to supervisory or other remuneration paid by Registrant to Supervisor and Sublessee.

Subsequent Events

Subsequent events have been evaluated for potential recognition and disclosure.

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

Readers of this discussion are advised that it should be read in conjunction with the condensed consolidated financial statements of Registrant (including related notes thereto) appearing elsewhere in this Form 10-Q. Certain statements in this discussion may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect Registrant’s current expectations regarding future results of operations, economic performance, financial condition and achievements of Registrant, and do not relate strictly to historical or current facts. Registrant has tried, wherever possible, to identify these forward-looking statements by using words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or words of similar meaning.

Although Registrant believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, such statements are subject to risks and uncertainties, which may cause the actual results to differ materially from those projected. Such factors include, but are not limited to, the following: general economic and business conditions, which will, among other things, affect demand for rental space, the availability of prospective tenants, lease rents and the availability of financing; adverse changes in Registrant’s real estate market, including, among other things, competition with other real estate owners, risks of real estate development and acquisitions; governmental actions and initiatives; and environmental/safety requirements.

Financial Condition and Results of Operations

At the time of its organization, Registrant acquired the Master Lease of the Property subject to the Sublease. Basic Rent received by Registrant was used to pay annual rent due under the Master Lease and the Basic Payment for supervisory services to Supervisor; the balance of such Basic Rent was distributed to the Participants. Basic Rent received by Registrant is used to pay the Basic Payment and a portion of debt service on the First Mortgage; the balance of such Basic Rent is distributed to the Participants. Commencing July 26, 2011, Basic rent will be increased to cover debt service on the refinanced loan balance to the extent the new mortgage debt exceeds the First Mortgage of $60,500,000.

Additional Rent and any interest and dividends accumulated thereon less any expenses and additions to general contingencies and and other reserves are distributed to the Participants after the additional payment to Supervisor. See Note D to the condensed consolidated financial statements herein. Pursuant to the Sublease, Sublessee has assumed responsibility for the condition, operation, repair, maintenance and management of the Property. Registrant is not required to maintain liquid assets to defray any operating expenses of the Property.

Registrant does not pay dividends. During the six-month period ended June 30, 2011, Registrant made regular monthly distributions of $98.21 for each $10,000 Participation ($1,178.52 per annum for each $10,000 Participation). There are no restrictions on Registrant’s present or future ability to make distributions; however, the amount of such distributions, particularly distributions of Additional Rent, depends solely on Sublessee’s ability to make payments of Basic Rent and Additional Rent to Registrant. Registrant expects to make distributions in the future to the extent it receives the payments provided for under the Sublease.

During March 2011 Registrant made no additional distribution to Participants of Additional Rent received for the year ending December 31, 2010. Additional Rent of $4,111,371 was applied to Registrant’s mortgage interest obligation and the balance for general contingencies. See Notes C and D to the condensed financial statements herein; and see below in “Liquidity, Capital Resources and Distributions” regarding Registrant’s anticipated inability to pay additional distributions during next several years.

During March 2010 Registrant made an additional distribution of Additional Rent of $3,361,924 received for the year ending December 31, 2009 to Participants after adding $2,000,000 to general contingencies of Registrant, $2,020,000 to satisfy a portion of Registrant’s First Mortgage interest obligation and $214,591 to Supervisor, offset by $26,104 of dividend and interest income.

Registrant’s results of operations are affected primarily by the amount of rent payable to it under the Sublease. The amount of Additional Rent payable to Registrant is affected by the New York City economy and real estate rental and tourist attraction markets, which are difficult for management to forecast, and by the amount of unfinanced improvements undertaken at the Property. The following summarizes, with respect to the current period and the corresponding period of the previous year, the material factors regarding Registrant’s results of operations for such periods:

Total revenues decreased for the six-month period ended June 30, 2011 as compared with the corresponding period of the prior year. The decrease was the result of a decrease in dividend and interest income for the six-month period as compared with the corresponding period of the prior year.

Total revenues decreased for the three-month period ended June 30, 2011 as compared with the corresponding period of the prior year. The decrease was the result of a decrease in dividend and interest income for the three-month period as compared with the corresponding period of the prior year.

Total expenses increased for the six-month period ended June 30, 2011 as compared with the corresponding period of the prior year. The increase was the result of an increase in basic supervisory fees to Malkin Holdings effective July 1, 2010 and professional fees and miscellaneous expenses for accounting fees which were paid by Supervisor prior to 2010 and other professional fees to Malkin Holdings for services rendered in connection with matters regarding ownership and operation of the Empire State Building for the six-month period as compared with the corresponding period of the prior year.

Total expenses increased for the three-month period ended June 30, 2011 as compared with the corresponding period of the prior year. The increase was the result of an increase in basic supervisory fees to Malkin Holdings effective July 1, 2010 and professional fees and miscellaneous expenses for accounting fees which were paid by Supervisor prior to 2010 and other professional fees to Malkin Holdings for services rendered in connection with matters regarding ownership and operation of the Empire State Building for the three-month period ended June 30, 2011 as compared with the corresponding period of the prior year.

Liquidity, Capital Resources and Distributions

Registrant’s liquidity has decreased as of June 30, 2011, as compared with December 31, 2010 due to substantially increased deferred costs. Adverse developments in economic, credit and investment markets over the last several years impaired general liquidity (although some improvement in such markets has arisen recently) and the developments may negatively impact Registrant and/or space tenants at the Building. Any such impact should be ameliorated by the fact that (a) each of Registrant and its Sublessee has very low debt in relation to asset value, (b) the Building’s rental revenue is derived from a substantial number of tenants in diverse businesses with lease termination dates spread over numerous years.

No amortization payments are due under the First Mortgage and Second Mortgage to reduce the outstanding principal balances prior to maturity. Furthermore, Registrant does not maintain any reserve to cover the principal payment of mortgage indebtedness at maturity. Therefore, repayment of the mortgages will depend on Registrant’s ability to arrange a refinancing. Assuming that the Real Estate continues to generate an annual net profit in future years comparable to that in past years, and assuming further that real estate capital and operating markets return to more stable patterns, consistent with long-term historical trends in the geographic area in which the Real Estate is located, Registrant anticipates that the value of the Real Estate will be in excess of the amount of the mortgage balances at maturity.

Registrant anticipates that funds for short-term working capital requirements for the Real Estate will be provided by cash on hand, rental payments received from the Sublessee (which entity is required under the Sublease to make payments of Basic Rent and, subject to cash flow, Additional Rent) and from additional advances of up to $76,000,000 available with respect to the July 26, 2011 refinancing. Long-term sources of working capital will be provided by rental payments from the Sublessee and, to the extent necessary, from additional capital investment by the members in Sublessee and/or additional external financing. Sublessee would also be required to make additional capital investment, if necessary to maintain the Real Estate. Registrant has no requirement to maintain substantial reserves to defray any operating expenses of the Real Estate.

Sublessee is to maintain the Building as a high-class office building as required by the terms of the Sublease.

Based on Sublessee’s review of the need for upgrades and improvements to the Property, Registrant has incurred improvement costs of approximately $10,163,000 through June 30, 2011, which costs were funded from Second Mortgage financing proceeds. Other improvement and tenanting costs funded out of Sublessee’s operating cash flow are owned by Sublessee and reflected in its financial statements. However, as of June 30, 2011 Registrant advanced approximately $8,962,000 to Sublessee to acquire building improvements and tenanting costs. To seek to maximize overall funds for improvement and tenanting costs, funding for the foregoing will be derived from currently unapplied amounts from the $31,500,000 financing that closed in the first quarter of 2009 and from the New Mortgage obtained in July 2011 for which Registrant received an initial advance of $159,000,000 and may be advanced an additional $76,000,000. Costs in excess of available mortgage proceeds will be funded out of Sublessee’s operating cash flow. Sublessee estimates that the total cost of all projects will be approximately $626,000,000 over 10 years including sprinklering of the Building of approximately $23,000,000 required by Local Law #26 to be completed by 2019.

On July 26, 2011, Registrant closed on a new mortgage loan with HSBC Bank USA and other participating banks (the “Lenders”) with an initial advance of $159,000,000 to be used to pay and discharge all existing mortgage loans secured by the Property, to fund operations and working capital requirements relating to the Property (including for improvements) and certain other general purposes. Subject to the conditions set forth in the loan agreement (the “Loan Agreement”), the Lenders may provide Registrant with additional advances of up to $76,000,000 and use commercially reasonable efforts to arrange for additional commitments from other financial institutions in an aggregate amount equal to $65,000,000. Subject to the terms and conditions of the Loan Agreement, the outstanding principal amount of the loan shall bear interest at a rate equal to 2.5% p.a. above 30-day LIBOR. Registrant is obligated to repay the outstanding amount of the loan plus accrued and unpaid interest and all other amounts due under the Loan Agreement and related documents on June 30, 2014, which Registrant may extend to June 30, 2015 and thereafter to June 30, 2016, in each case, subject to an extension fee of 0.25% of the total availability under the Loan Agreement at the time of such extension. Such extensions are subject to customary conditions, including the maintenance of a certain loan-to-value ratio and debt yield and the absence of an event of default. The First Mortgage and Second Mortgage loans aggregating $92,000,000 plus accrued interest and applicable prepayment penalties were prepaid on July 26, 2011 out of proceeds from the new $159,000,000 financing described above.

Sublessee anticipates that its operating cash flow will continue to be dedicated largely to the ongoing improvement costs, greatly reducing or eliminating both (a) Sublessee’s payment of Additional Rent and (b) Registrant’s ability to make extra distributions to Participants.

As a result, Registrant previously advised Participants that, for several subsequent years, it may make no distributions other than regular monthly distributions at the rate of $1,178.52 per annum for each $10,000 Participation. As noted above in “Forward Looking Statements,” the foregoing is based on estimates, and actual results may be materially different.

Inflation

Registrant believes that there has been no material change in the impact of inflation on its operations since the filing of the 10-K for the year ended December 31, 2010.

Security Ownership

As of June 30, 2011, the Members of Registrant owned of record and beneficially an aggregate of $41,042 of Participations in Registrant, representing less than .131% of the currently outstanding Participations therein totaling $33,000,000.

As of June 30, 2011, certain of the Members of Registrant held additional Participations as follows:

Entities for the benefit of members of Peter L. Malkin’s family owned of record and beneficially $1,064,583 of Participations. Peter L. Malkin disclaims any beneficial ownership of such Participations, except that related trusts are required to complete scheduled payments to Peter L. Malkin.

Peter L. Malkin owned of record as trustee or co-trustee, but not beneficially, $516,667 of Participations. Peter L. Malkin disclaims any beneficial ownership of such Participations.

Anthony E. Malkin owned of record as trustee or co-trustee, but not beneficially, $38,333 of Participations. Anthony E. Malkin disclaims any beneficial ownership of such Participations.

Trusts for the benefit of members of Anthony E. Malkin’s family owned of record and beneficially $50,000 of Participations. Anthony E. Malkin disclaims any beneficial ownership of such Participations.

Members of Thomas N. Keltner, Jr.’s family owned of record and beneficially $6,667 of Participations

Item 4T.		Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. The Supervisor after evaluating the effectiveness of Registrant’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of June 30, 2011, the end of the period covered by this report, has concluded that as of that date that Registrant’s disclosure controls and procedures were effective and designed to ensure that material information relating to Registrant would be made known to it by others within those entities on a timely basis.

(b) Changes in internal controls over financial reporting. There were no changes in Registrant’s internal controls over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to affect, Registrant’s internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1.		Legal Proceedings.

The Property of Registrant was the subject of the following material litigation:

Malkin Holdings LLC and Peter L. Malkin, a member in Registrant, were engaged in a proceeding with Sublessee’s former managing agent, Helmsley-Spear, Inc. commenced in 1997, concerning the management, leasing and supervision of the Property that is subject to the Sublease to Sublessee. In this connection, certain costs for legal and professional fees and other expenses were paid by Malkin Holdings and Mr. Malkin. Malkin Holdings and Mr. Malkin have represented that such costs will be recovered only to the extent that (a) a competent tribunal authorizes payment or (b) an investor voluntarily agrees that his or her proportionate share be paid. Accordingly, Registrant’s allocable share of such costs is as yet undetermined, and Registrant has not provided for the expense and related liability with respect to such costs in its financial statements included in this Form 10-Q. As a result of an August 29, 2006 settlement agreement, which included termination of this proceeding, Registrant will not recognize any gains or losses from this proceeding other than the possible charges for the aforementioned fees and expenses.

An August 29, 2006 settlement agreement terminated Helmsley-Spear, Inc. as managing and leasing agent at the Property as of August 30, 2006. Sublessee is now self-managing the Property while engaging third party leasing agents, CB Richard Ellis for retail space since August 30, 2006 and Newmark Knight Frank for non-retail space since October 21, 2009.

EXHIBIT INDEX

Number					Document		Page*
	3	(a)			Registrant’s Partnership Agreement dated July 11, 1961, filed as Exhibit No. 1 to Registrant’s Registration Statement on Form S-1 as amended (the “Registration Statement”) by letter dated August 8, 1962 and assigned File No. 2-18741, is itself incorporated by reference as an exhibit hereto.
	3	(b)			Amended Business Certificate of Registrant filed with the Clerk of New York County on August 7, 1998 reflecting a change in the Partners of Registrant which was filed as Exhibit 3(b) to Registrant’s 10-Q-A for the quarter ended September 30, 1998 and is incorporated by reference as an exhibit hereto.
	3	(c)			Registrant’s Consent and Operating Agreement dated as of September 30, 2001
	3	(d)			Certificate of Conversion of Registrant to a limited liability company dated October 1, 2001 filed with the New York Secretary of State on October 3, 2001.
	4				Registrant’s form of Participating Agreement, filed as Exhibit No. 6 to the Registration Statement by letter dated August 8, 1962 and assigned File No. 2-18741, is incorporated by reference as an exhibit hereto.
	10	(d)			Second Modification of Lease Agreement, dated February 25, 2009, which was filed under Item 10(d) of Registrant’s Form 10-K for the fiscal year ended December 31, 2008 and is incorporated by reference as an exhibit hereto.
	10	(e)			Exercise of lease renewal options as of January 1, 2010 by Registrant and February 11, 2010 by Sublessee for the period January 5, 2013 to January 5, 2076 which was filed as Exhibit 10 (e) to Registrant’s Form 10-k for the fiscal year ended December 31, 2009 and is incorporated by reference as an exhibit hereto.

EXHIBIT INDEX
(cont.)

Number					Document		Page*
	10	(f)			Agreement of Members of Registrant as of July 1, 2010 which was filed as Exhibit 10 (f) to Registrant’s Form 10-k for the fiscal year ended December 31, 2009 and is incorporated by reference as an exhibit hereto.
	24.1				Power of Attorney dated September 8, 2011 between the Members and Mark Labell which is being filed as Exhibit 24.1 to Registrant’s 10-Q for the quarter ended June 30, 2011.
	31.1				Certification of Mark Labell, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2				Certification of Mark Labell, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1				Certification of Mark Labell, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2				Certification of Mark Labell, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

The individual signing this report on behalf of Registrant is Attorney-in-Fact for Registrant and each of the Members in Registrant, pursuant to Power of Attorney, dated September 8, 2011 (the “Power”).

EMPIRE STATE BUILDING ASSOCIATES L.L.C.
(Registrant)

By:		/s/ Mark Labell   Mark Labell*, Attorney-in-Fact on behalf of:
Peter L. Malkin, Member
Anthony E. Malkin, Member
Thomas N. Keltner, Jr., Member

Date: September 20, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned as Attorney-in-Fact for each of the Members in Registrant, pursuant to the Power, on behalf of Registrant and as a Member in Registrant on the date indicated.

By:		/s/ Mark Labell   Mark Labell*, Attorney-in-Fact on behalf of:
Peter L. Malkin, Member
Anthony E. Malkin, Member
Thomas N. Keltner, Jr., Member

Date: September 20, 2011