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EXCEL - IDEA: XBRL DOCUMENT - EMPIRE STATE BUILDING ASSOCIATES L.L.C.Financial_Report.xls
10-Q - FORM 10-Q - EMPIRE STATE BUILDING ASSOCIATES L.L.C.d412408d10q.htm
XML - IDEA: XBRL DOCUMENT - EMPIRE STATE BUILDING ASSOCIATES L.L.C.R9.htm
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EX-31.2 - EX-31.2 - EMPIRE STATE BUILDING ASSOCIATES L.L.C.d412408dex312.htm
EX-10.2 - EX-10.2 - EMPIRE STATE BUILDING ASSOCIATES L.L.C.d412408dex102.htm
EX-31.1 - EX-31.1 - EMPIRE STATE BUILDING ASSOCIATES L.L.C.d412408dex311.htm
EX-32.1 - EX-32.1 - EMPIRE STATE BUILDING ASSOCIATES L.L.C.d412408dex321.htm
EX-10.1 - EX-10.1 - EMPIRE STATE BUILDING ASSOCIATES L.L.C.d412408dex101.htm
EX-32.2 - EX-32.2 - EMPIRE STATE BUILDING ASSOCIATES L.L.C.d412408dex322.htm
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EX-24.1 - EX-24.1 - EMPIRE STATE BUILDING ASSOCIATES L.L.C.d412408dex241.htm
v2.4.0.6
Sublease
9 Months Ended
Sep. 30, 2012
Sublease

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 overage 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 (“Overage Rent”). In addition to the above, Sublessee is required to pay for all operating and maintenance expenses, real estate taxes, and necessary repairs and replacements, and keep the Property adequately insured against fire and accident.

In accordance with the second sublease modification dated February 25, 2009, Basic Rent described above had been increased to cover debt service on the $31,500,000 second mortgage that closed on February 25, 2009. In accordance with the third sublease modification dated July 26, 2011, Basic Rent was increased to cover debt service relating to the Secured Term Loan, refinancing that prepaid the first and second mortgages aggregating $92,000,000 (Note C), to the extent the Secured Term Loan debt exceeds the previous first mortgage of $60,500,000. In accordance with the fourth and fifth modifications of the Sublease, basic rent was further increased to cover debt service on additional advances aggregating $60,000,000 ($30,000,000 on each of April 5, 2012 and July 9, 2012). Basic Rent increased by $1,250,286 for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011, representing debt service, which consists only of interest, on the balance of the Secured Term Loan in excess of $60,500,000.

Basic Rent will be increased to cover debt service 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.

 

Due to Sublessee at September 30, 2012 and December 31, 2011 represents the payable to Sublessee for building improvements and leasing costs. Due to Sublessee, a related party, are $24,958,868 and $6,067,803 at September 30, 2012 and December 31, 2011, respectively. Due from Sublessee at September 30, 2012 and December 31, 2011 represents funds held in escrow by Sublessee for tenant improvements and overage rent due from Sublessee as of September 30, 2012 and 2011, respectively.

Overage Rent and any interest and dividends accumulated thereon are distributed annually after deduction for any additional payment described in Note E below, other expenses and additions to general contingencies management judges to be suitable under the circumstances. For 2011, Sublessee reported net operating profit of $58,560,898; therefore, Overage Rent of $28,780,449 was earned for the year ended December 31, 2011. Overage Rent income is recognized when earned from the Sublessee, at the close of the year ending December 31. 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 Overage 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.

The Supervisor of the Registrant has filed a registration statement on Form S-4 for the solicitation of consents of the Participants in the Registrant and other public limited liability companies supervised by the Supervisor to the Consolidation (as defined below). In the Consolidation, (x) the property interests of the Registrant, such other public limited liability companies and certain private entities supervised by the Supervisor, and (y) the Supervisor and certain affiliated management companies would be contributed to the operating partnership of Empire State Realty Trust, Inc., a newly organized real estate investment trust.

Consents are required from Participants in the Registrant and such other public limited liability companies for them to contribute their interests in the Consolidation, and the solicitation of such consents will not commence until the SEC declares effective the registration statement on Form S-4. Consents have been obtained from participants in the private entities and the Supervisor and certain affiliated companies and affiliates of the Supervisor for them to make such contributions.

The consideration to be paid to the contributing companies and entities in the Consolidation will be allocated in accordance with exchange values determined based on appraisals by an independent third party. Such method of allocation has been approved by the Sublessee. Based on the exchange values, if the Consolidation proposal is approved by the Registrant’s Participants, the consideration with respect to the Empire State Building will be allocated approximately 50% to the Registrant and 50% to the Sublessee, which the Supervisor believes is in accordance with the historical treatment of the Registrant and the Sublessee.