Empire State Building Associates L.L.C.

December 31, 2009

FORM 10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

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 the 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 the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x No o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) 

Yes o  No x .

The aggregate market of the voting stock held by non-affiliates of the Registrant:  Not applicable, but see Items 5 and 10 of this report.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ___

Indicate by check mark whether the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x .

Indicate by check mark whether the 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 Companyx

                                                                                                                                                                                                                                                        

Empire State Building Associates L.L.C.

December 31, 2009

PART I

Item 1.

Business.

(a)

General

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.  Through April 16, 2002, Registrant owned the tenant's interest in a master operating leasehold (the "Master Lease") of the Empire State Building (the "Building"), located at 350 Fifth Avenue, New York, New York. 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, 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 with Capital One Bank (the “First Mortgage”) to finance the acquisition and certain related costs. 

Registrant does not operate the Building. It subleases the Building to Empire State Building Company L.L.C. (the "Sublessee") pursuant to a net operating sublease (the "Sublease") which included an initial term which expired on January 4, 1992. The Sublease includes four separate options for Sublessee to renew the term, in each case for an additional 21 years, on the same 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).

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 in his respective member interest in Registrant (the "Participants"). 

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.  All of the members in Registrant hold senior positions at Malkin Holdings LLC (“Malkin Holdings” or the "Supervisor") (formerly Wien & Malkin LLC), One Grand Central Place, 60 East 42nd Street, New York, New York, which provides supervisory and other services to Registrant and to Sublessee. See Items 10, 11, 12 and 13 hereof for a description of the ongoing services rendered by, and compensation paid to, Supervisor and for a discussion of certain relationships which may pose potential conflicts of interest among Registrant, Sublessee and certain of their respective affiliates.

As of December 31, 2009, the Building was 72% occupied by approximately 306 tenants who engage in various businesses, including the Boy Scouts, the YMCA, the practice of law and accounting, ladies' and men's apparel, and ladies' and men's shoes.  Registrant does not maintain a full-time staff.  See Item 2 hereof for additional information concern­ing the Real Estate.

 

(b)

The Lease and Sublease

The annual rent payable by Registrant to its subsidiary under the Master Lease is $1,970,000 from January 5, 1992 through January 5, 2013 and $1,723,750 annually during the term of each renewal period thereafter. These amounts are eliminated in consolidation.

Sublessee is required to pay annual basic rent ("Basic Rent") equal to $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. See Item 2. 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 2nd lease modification dated February 25, 2009, the Basic Rent described above has been increased to cover debt service on the $31,500,000 second mortgage (the “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.  

Due from the Sublessee at December 31, 2009 represents advances made to Sublessee for building improvements. 

Additional Rent income is recognized when earned from the Sublessee, at the close of the year ending December 31; such income is not determinable until the Sublessee, pursuant to the Sublease, provides the 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.  See Note 4 of Notes to the Consolidated Financial Statements filed under Item 8 hereof (the "Notes") regarding Additional Rent payments by Sublessee for the fiscal years ended December 31, 2009 and 2008. There was Additional Rent of $7,570,411 for the year ended December 31, 2009.

Real estate taxes paid directly by the Sublessee totaled $24,785,578 and $22,677,230 for the years ended December 31, 2009 and 2008, respectively.

(c)

Competition

Pursuant to tenant space leases at the Building, the average annual base rental payable to Sublessee is approximately $29 per square foot (exclusive of electricity charges and escalation). The asking rents for new leases at the Building range from $32 to $52 per square foot.

(d)

Tenant Leases

Sublessee operates the Building free from any federal, state or local government restrictions involving rent control or other similar rent regulations which may be imposed upon residential real estate in Manhattan.  Any increase or decrease in the amount of rent payable by a tenant is governed by the provisions of the tenant's lease.

Item 2.

Property.

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, and the Land thereunder, at a price of $57,500,000, and obtained a $60,500,000 first mortgage with Capital One Bank to finance the acquisition and certain related costs. The Building, erected in 1931 and containing 102 stories, a concourse and a lower lobby, occupies the entire blockfront from 33rd Street to 34th Street on Fifth Avenue.  The Building has 72 passenger elevators and 4 freight elevators and is equipped with air conditioning and individual air handling units.  The Building is subleased to Sublessee under the Sublease which expires on January 4, 2013 and contains three 21-year renewal options.  See Item 1 hereof for a description of the terms of the Lease and Sublease.

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 the Registrant incurred no leasehold rent expense after acquiring the Real Estate.

 

The First Mortgage is scheduled to mature on May 1, 2012 and requires monthly payments of interest only at 6.5% per annum. The First Mortgage may be prepaid at any time after 24 months with the payment of a premium equal to the greater of (a) 1% of the amount prepaid and (b) an amount calculated pursuant to a prepayment formula designed to preserve the bank’s yield to maturity. The First Mortgage is 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 Associates borrowed $31,500,000 from Signature Bank (the “Second Mortgage”).  The Second Mortgage also matures on May 1, 2012 and requires monthly payments of interest only at 6.5% per annum.  The Second Mortgage may be prepaid at any time without penalty and is secured by a lien on the Real Estate and Registrant’s leasehold estate under the Master Lease of the Real Estate. In connection with obtaining the second mortgage, Registrant incurred costs of approximately $1,560,000.

Restricted cash at December 31, 2009 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 mortgage interest obligation. On March 25, 2009, Registrant deposited an additional $2,000,000 into this restricted account under the same conditions and will continue to do so annually hereafter.

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.

 

Item 3.

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 consolidated financial statements. As a result of the 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.

The 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. 

Item 4.

Submission of Matters to a Vote of Participants.

No matters were submitted to the Participants during the period covered by this report.

PART II

Item 5.

Market for Registrant's Common Equity and Related Security Holder Matters.

Registrant was originally organized as a general partnership pursuant to a partnership agreement dated as of July 11, 1961. On October 1, 2001, Registrant converted from a general partnership to a limited liability company under New York law.

Registrant has not issued any common stock.  The securi­ties registered by it under the Securities Exchange Act of 1934, as amended, consist of participations in the Members’ interests in Registrant (the "Participations") and are not shares of common stock nor their equivalent.  The Participations represent each Participant's fractional share in a Member's undivided interest in Registrant and are divided approximately equally among the Members.  A full unit of the Participations was offered originally at a purchase price of $10,000; fractional units were also offered at proportionate purchase prices.  Registrant has not repurchased Participations in the past and is not likely to change that policy in the future.

(a)

The Participations are neither traded on an established securities market nor are readily tradable on a secondary market or the substantial equivalent thereof.  Based on Registrant's transfer records, Participations are sold by the holders thereof from time to time in privately negotiated transactions and, in many instances, Registrant is not aware of the prices at which such transactions occur.  During the past year there were 167 transfers. In ten instances, the indicated purchase price was equal to 1.5 times the face amount of the Participation transferred, i.e., $15,000 for a $10,000 Participation. In ten instances, the indicated purchase price was equal to 2.25 times the face amount of the Participation transferred. In nine instances, the indicated purchase price was equal to three times the face amount of the Participation transferred. In eight instances, the indicated purchase price was equal to five times the face amount of the Participation transferred. In all other cases, no consideration was indicated. 

(b)

As of December 31, 2009, there were 2,790 holders of Participations of record.

(c)

Registrant does not pay dividends.  During the year ended December 31, 2009, Registrant made regular monthly distributions of $98.21 for each $10,000 Participation.  There was Additional Rent of $7,570,411 for the year ended December 31, 2009 which enabled Registrant to make an additional distribution for each $10,000 Participation of $1,019 on March 2, 2010.  See Item 1 hereof.  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.  See Item 1 hereof.  Registrant expects to make monthly distributions in the future so long as it receives the payments provided under the Sublease.  See Item 7 hereof.

                                                                                                                                                                                                                                   

Item 6.

EMPIRE STATE BUILDING ASSOCIATES L.L.C.

(A Limited Liability Company)

SELECTED FINANCIAL DATA

(Unaudited)

The following table presents selected financial data of the Registrant for each of the five years in the period ended December 31, 2009.  This information is unaudited and has been derived from the audited consolidated financial statements included in this Annual Report on Form 10-K or from audited consolidated financial statements included in Annual Reports on Form 10-K previously filed by the Registrant.  This data should be read together with the consolidated financial statements and the notes thereto included in this Annual Report on Form 10-K.

 

Year ended December 31

 

2009

2008

2007

2006

2005

 

 

 

 

 

 

Basic rental income

$7,809,181

$6,018,750

$6,018,750

$6,018,750

$6,018,750

Additional rent income

7,570,411

3,509,384

17,025,749

18,791,329

16,324,979

Dividend and interest income

49,985

216,802

418,234

     339,334

       158,209

Miscellaneous

                -

                 -

                  -

            978

                  -

 

 

 

 

 

 

 

Total revenue

$15,429,577

$9,744,936

$23,462,733

$25,150,391

$22,501,938

 

 

 

 

 

 

 

Net income

$7,369,823

$4,196,903

$17,068,579

$18,813,909

$16,308,881

Earnings per $10,000

 participation unit,

 based on 3,300 

 participation units

 outstanding during the year

$2,233

$1,272

$5,172

$5,701

$4,942

 

 

 

 

 

 

Total assets

$102,796,559

$64,995,577

$79,886,241

$81,491,531

$80,063,503

Long-term obligations

$92,000,000

$60,500,000

$60,500,000

$60,500,000

$60,500,000

 Distributions per $10,000

participation unit, based on

3,300 participation units 

outstanding during the year:

 

Income

$1,179

$1,272

$5,172

$5,298

$3,318

 

Return of capital

      -0-

  3,958

     596

      -0-

       -0-

 

Total distributions

$1,179

$5,230

$5,768

$5,298

$3,318

                                                                                                                                                                                            

EMPIRE STATE BUILDING ASSOCIATES L.L.C.

(A Limited Liability Company)

QUARTERLY RESULTS OF OPERATIONS

(Unaudited)

Item 6a.

The following table presents the Registrant’s unaudited operating results for each of the eight fiscal quarters in the period ended December 31, 2009.  The information for each of these quarters is unaudited and has been prepared on the same basis as the audited consolidated financial statements included in this Annual Report on Form 10-K.  In the opinion of management, all necessary adjustments, which consist only of normal and recurring accruals, have been included to present fairly the unaudited quarterly results.  This data should be read together with the consolidated financial statements and the notes thereto of the Registrant included in this Annual Report on Form 10-K.

Three Months Ended

 

 

 

 

 

 

 

March 31,

June 30,

September 30,

December 31,

Consolidated Income Data:

2009

2009

2009

2009

  

 

 

 

 

 Basic rental income

$1,744,013

$2,016,287

$2,022,103

$2,026,778

 Additional rent income

-

-

-

7,570,411

 Dividend and interest income

     13,786

      22,219

      10,543

        3,437

    Total revenue

 1,757,799

  2,038,506

 2,032,646

 9,600,626

 

 

 

 

 

  Interest on mortgages

1,233,375

1,511,611

1,528,222

1,528,223

  Supervisory services

39,854

39,854

39,855

254,445

  Depreciation of building and improvements 

249,566

269,964

314,688

314,711

Amortization of mortgage financing costs

85,488

166,650

166,651

166,650

  Professional fees and miscellaneous

      62,141 

    122,202

       6,641

       (41,037)

    Total expenses

 1,670,424

 2,110,281

 2,056,057

  2,222,992

    Net income (loss)

$ 87,375

($ 71,775)

($  23,411)

$7,377,634

 

 

 

 

 

Earnings (loss) per $10,000 participation unit, based on 3,300 participation units outstanding during each period

$26

($22)

($7)

$2,236

 

 

 

 

 

                                                                                                                                                                                                                                                 

EMPIRE STATE BUILDING ASSOCIATES L.L.C.

(A Limited Liability Company)

QUARTERLY RESULTS OF OPERATIONS

(Unaudited)

Item 6a.

Three Months Ended

 

 

 

 

March 31,

June 30,

September 30,

December 31,

Consolidated Income Data:

2008

2008

2008

2008

  

 

 

 

 

 Basic rental income

$1,504,687

$1,504,688

$1,504,688

$1,504,687

 Additional rent income

-

-

-

3,509,384

 Dividend and interest income

     135,515

      34,789

      30,981

        15,517

    Total revenue

 1,640,202

  1,539,477

 1,535,669

 5,029,588

 

 

 

 

 

  Interest on mortgage

994,049

994,049

1,004,972

1,004,972

  Supervisory services

39,854

39,854

39,854

39,855

  Depreciation of building 

249,566

249,565

249,564

249,567

Amortization of mortgage financing costs

44,907

44,907

44,907

44,908

  Professional fees and miscellaneous

      64,322 

      41,259

     98,612

         8,490

    Total expenses

 1,392,698

 1,369,634

 1,437,909

  1,347,792

    Net income

$ 247,504

$ 169,843

$  97,760

$3,681,796

 

 

 

 

 

Earnings per $10,000 participation unit, based on 3,300 participation units outstanding during each period

$75

$51

$30

$1,116

 

 

 

 

 

                                                                                                                                                                                                                                             

 

   Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

Readers of this discussion are advised that the discussion should be read in conjunction with the consolidated financial statements of Registrant (including related notes thereto) appearing elsewhere in this Form 10-K. 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.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

The Securities and Exchange Commission (“SEC”) issued disclosure guidance for “Critical Accounting Policies.” The SEC defines Critical Accounting guidance for Critical Accounting Policies as those that require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

Registrant’s discussion and analysis of its financial condition and results of operations are based upon Registrant’s consolidated financial statements, the preparation of which takes into account estimates based on judgments and assumptions that affect certain amounts and disclosures. Accordingly, actual results could differ from these estimates. The accounting policies and estimates used and outlined in Note 2 to Registrant’s consolidated financial statements, which are presented elsewhere in this annual report, have been applied consistently as at December 31, 2009 and 2008, and for the years ended December 31, 2009 and 2008. Registrant believes that the following accounting policies or estimates require the application of management’s most difficult, subjective, or complex judgments:

Valuation of Long-Lived Assets: Registrant assesses the carrying amount of long-lived assets whenever events or changes in circumstances indicate that theircarrying amount may not be recoverable. When Registrant determines that the carrying amount of long-lived assets is impaired, the measurement of any impairment is based on a discounted cash flow method. 

Revenue Recognition: Basic Rent and Additional Rent, which is based on the Sublessee’s annual net income as defined in the Sublease, are recognized when earned. Before Registrant can recognize revenue, it is required to assess, among other things, its collectibility. If Registrant incorrectly determines the collectability of revenue, its net income and assets could be overstated.

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.  Currently, Basic Rent received by Registrant is used to pay the Basic Payment for supervisory services and a portion of debt service on the mortgages; the balance of such Basic Rent is distributed to the Participants.  Additional Rent and any interest and dividends accumulated thereon less any expenses and addition to reserves are distributed to the Participants after the additional payment to Supervisor.  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.

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, and 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 special supervisory services at hourly rates.

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. 

As compared with the prior year, a decrease in Additional Rent earned in any year reduces the distributions made to the Participants in the following year and the additional payment to Supervisor. Reductions may also affect Registrant’s ability to set-aside $2,000,000 annually towards payment of interest on the First Mortgage. See paragraph 1 of Item 7 hereof and Note 4 of the Notes to the consolidated financial statements. 

The following summarizes the material factors affecting Registrant's results of operations for the two preceding years: 

(a)

Total revenues increased for the year ended December 31, 2009 as compared with the year ended December 31, 2008.  Such increase was the net result of an increase in Basic Rent income to cover an increase in debt service, an increase in Additional Rent received by Registrant in 2009 and a decrease in dividend and interest income earned as compared with the year ended December 31, 2008. See Note 4 of the Notes to the Consolidated Financial Statements.

(b)

Total expenses increased for the year ended December 31, 2009 as compared with the year ended December 31, 2008.  Such increase is the net result of an increase in the interest on the mortgages, the additional payment to Supervisor, depreciation of building improvements and amortization of mortgage financing costs relating to the Second Mortgage and a decrease in fees and miscellaneous expenses as compared with the year ended December 31, 2008. 

Liquidity and Capital Resources

Registrant's liquidity has increased for the year ended December 31, 2009 as compared with the year ended December 31, 2008 due to the Second Mortgage proceeds and Registrant’s increased cash balance maintained for contingencies. Recent adverse developments in credit and investment markets have impaired liquidity in the market in general and 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 mortgages 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 working capital for the Real Estate will be provided from rental payments received by Sublessee, which entity is required under the Sublease to make payments of Basic Rent and, subject to cash flow, Additional Rent. 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.

Registrant has the following contractual obligations:

**Payments due by period**

**Contractual Obligations**

**Total**

**Less than1 year**

**1-3 years**

**3-5 years**

**More than5 years**

Long-Term Debt Obligations

$92,000,000

$0

$92,000,000

$0

$0

Interest Obligations 

14,272,105

 6,063,056

8,209,049

0

0

Capital Lease Obligations

0

0

0

0

0

Purchase Obligations

0

0

0

0

0

Other Long-Term Liabilities Reflected on the Registrant's Balance Sheet 

                  0

                0

                0

                  0

                  0

Total

$106,272,105

$6,063,056

$100,209,049

$  0

$  0

Inflation

Inflationary trends in the economy do not directly impact Registrant's operations.  As noted above, Registrant does not actively engage in the operation of the Real Estate.  Inflation may impact the operations of the Sublessee.  The Sublessee is required to pay the Basic Rent regardless of the results of its operations.  Inflation and other operating factors affect the amount of Additional Rent payable by the Sublessee, which is based on the Sublessee's net operating profit.

Other Information

The 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 $10,160,000 for the year ended December 31, 2009, 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, during the year ended December 31, 2009 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, currently unapplied amounts of such financing proceeds may be used for such costs in the future. 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. 

The Sublessee has not achieved its own required internal approvals for such financing beyond approximately $71,500,000 including the $31,500,000 Second Mortgage and now anticipates that its operating cash flow will thus 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 had advised Participants that possibly in subsequent years, it expects to 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. 

   

Item 8.

Financial Statements and Supplementary Data.

 

The consolidated financial statements of the Registrant as of December 31, 2009 and 2008 and for each of the two years in the period ended December 31, 2009 and the financial statements of the Sublessee as of and for the year ended December 31, 2009 are included in this annual report immediately following Exhibit 32.2 or will be included by amendment.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None

Item 9a.           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 December 31, 2009, 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 him 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, the Registrant’s internal controls over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting 

Registrant’s Supervisor is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934).

Registrant’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with U.S. generally accepted accounting principles. Registrant’s internal control over financial reporting includes those policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of Registrant’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that Registrant’s receipts and expenditures are being made only in accordance with authorizations of management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Registrant’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision of and with the participation of the Supervisor, an assessment was conducted of the effectiveness of Registrant’s internal control over financial reporting based on the framework and criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this assessment Registrant’s Supervisor has concluded that, as of December 31, 2009, Registrant’s internal control over financial reporting was effective.

This annual report does not include an attestation report of Registrant’s current registered public accounting firm regarding internal control over financial reporting. The Registrant’s Supervisor’s report was not subject to attestation by Registrant’s current registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit Registrant to provide only its report in this annual report.

PART III

Item 10.

Directors and Executive Officers of Registrant.

Registrant has no directors or officers or any other centralization of management.  There is no specific term of office for any Agent.  The table below sets forth as to each Member as of December 31, 2009 the following: name, age, nature of any family relationship with any other Agent, business experience during the past five years and principal occupation and employment during such period, including the name and principal business of any corporation or any organization in which such occupation and employment was carried on and the date such individual became an Agent:

 

Name

 

 

 

Age

Nature of Family Relationship

Business Experience

Principal Occupation 

and Employment

Date Individual became an agent

Peter L. Malkin
76

Father of Anthony E. Malkin

 

Real Estate Supervision

Chairman, Malkin Holdings LLC

1961

Anthony E. Malkin

48

Son of Peter L. Malkin

Real Estate Supervision and Management

President,  Malkin Holdings LLC and Malkin  Properties, L.L.C.

 

2001

Thomas N. Keltner, Jr.

64

None

Real Estate Supervision

General Counsel,

Malkin Holdings LLC

1998

As stated above, all three Members who are acting as Agents for Participants hold senior positions at Supervisor.  See Items 1, 11, 12 and 13 hereof for a description of the services rendered by, and the compensation paid to, Supervisor and for a discussion of certain relationships which may pose actual or potential conflicts of interest among Registrant, Sublessee and certain of their respective affiliates.

 

The names of entities which have a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or are subject to the requirements of Section 15(d) of that Act and in which any Member is a director, member or general partner are as follows:

Peter L. Malkin is a member in 250 West 57th St. Associates L.L.C. and 60 East 42nd St. Associates L.L.C. 

Anthony E. Malkin is a member in 250 West 57th St. Associates L.L.C. and 60 East 42nd St. Associates L.L.C.

Thomas N. Keltner, Jr. is a member in 60 East 42nd St. Associates L.L.C.

Item 11.

Executive Compensation.

As stated in Item 10 hereof, Registrant has no directors or officers or any other centralization of management.

Registrant’s organizational documents do not provide for a board of directors or officers. As described in the Report, Registrant is a limited liability company which is supervised by Malkin Holdings. No remuneration was paid during the current fiscal year ended December 31, 2009 by Registrant to any of the Agents as such.  Registrant pays Supervisor for supervisory services and disbursements. The basic fee (the "Basic Payment") has 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. 

In 2009, Supervisor received $108,836 for special supervisory services at hourly rates on certain matters regarding financing, ownership, and operation of the Empire State Building, all representing Registrant’s allocable portion of such fees to be paid directly and not borne indirectly through overage rent deductions. Supervisor also receives an additional payment equal to 6% of distributions to the Participants in Registrant. Distributions in respect of Malkin Holdings’ profit interest for 2009 were $214,591.  For tax purposes, any additional payment is recognized as a profits interest and the Supervisor is treated as a partner, all without modifying each Participant’s distributive share of reportable income and cash distributions. See Item 7 hereof. As noted in Items 1 and 10 of this report, all of the Agents hold senior positions at Supervisor.

 

Malkin Holdings also serves as supervisor for Sublessee, for which it receives a basic annual fee of $270,000. For 2009, Malkin Holdings received $313,767 in other service fees from Sublessee. Under separate agreements to which Sublessee is not a party, certain of Sublessee’s participants pay Malkin Holdings and members of Peter L. Malkin’s immediate family a percentage of distributions above an annual threshold. These third party payments (which totaled $1,460,306 to Malkin Holdings and such Malkin family members in 2009) do not impose any obligation upon Sublessee or affect its assets and liabilities.

Item 12.

Security Ownership of Certain Beneficial Owners and Management.

(a)

Registrant has no voting securities (Item 5).  At December 31, 2009, no person owned of record or was known by Registrant to own beneficially more than 5% of the outstanding Participations.

(b)

At December 31, 2009, the Members (Item 10) beneficially owned, directly or indirectly, the following Participations:

 

Title of Class

Name & Address of Benefical Owners

Amount of Beneficial Ownership

Percent of Class

Participations in Member Interest

Anthony E. Malkin

 One Grand Central Place

60 East 42nd Street

New York, N.Y.  10165

$23,333

.07071%

 

 

 

 

 

Thomas N. Keltner, Jr.

One Grand Central Place

60 East 42nd Street

New York, N.Y.  10165

$17,709

.05366%

At such date, certain of the Members (or their respective spouses) held additional Participations as follows:

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

Entities for the benefit of members of Peter L. Malkin's family owned of record and beneficially $1,040,416 of Participations.  Peter L. Malkin disclaims any beneficial ownership of such Participations, except that related family trusts and entities are required to complete scheduled payments to Peter L. Malkin.

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. 

(c)

Not applicable.

Item 13.

Certain Relationships and Related Transactions.

(a)

As stated in Item 1 hereof, Peter L. Malkin, Anthony E. Malkin and Thomas N. Keltner, Jr. are the three Members in Registrant and also act as agents for the Participants in their respective member interests.  Peter L. Malkin is also a member in Sublessee.  As a consequence of one of the three Members being a member in Sublessee, and all of the Members holding senior positions at Supervisor (which supervises Registrant and Sublessee), certain actual and potential conflicts of interest may arise with respect to the management and administration of the business of Registrant.  However, under the respective participating agreements pursuant to which the Members act as agents for the Participants, certain transactions require the prior consent from Participants owning a specified interest under the agreement in order for the Agents to act on their behalf.  Such transactions, among others, include modifications and extensions of the Sublease or Mortgages, or a sale or other disposition of the Property or substantially all of Registrant's assets.

Reference is made to Items 1 and 2 hereof 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 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, by reason of their position at Supervisor, may receive income attributable to supervisory or other remuneration paid by Registrant to Supervisor and Sublessee.  See Item 11 hereof for a description of the remuneration arrangements between Registrant and Supervisor relating to supervisory services provided by Supervisor.

Reference is also made to Items 1 and 10 hereof for a description of the relationship between Registrant and Supervisor, of which all of the Agents are among the Members.  The respective interest of the Members in any remuneration paid by Registrant to Supervisor arise solely from such member's interest in Supervisor.  See Item 11 hereof for a description of the remuneration arrangements between Registrant and Supervisor relating to supervisory services provided by Supervisor.  

(b)

Reference is made to Paragraph (a) above.

(c)

Not applicable.

(d)

Not applicable.

Item 14.          PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The fees paid by Malkin Holdings LLC, the Supervisor of Registrant, to Margolin, Winer & Evens LLP for professional services for the years ended December 31, 2009 and 2008, respectively, were as follows:

           

Fee Category

2009

2008

Audit Fees

$61,000

    $56,500    

Audit-Related Fees                                                -                                  

     -

Tax Fees                                                         7,000                                      6,500

All Other Fees

           -

           -

     Total Fees

$68,000

$63,000

Audit Fees.  Consist of fees billed for professional services rendered for the audit of Registrant’s consolidated financial statements and review of the interim financial statements included in quarterly 10-Q reports.

 

           Tax Fees.  Consists of fees billed for professional services for tax compliance, tax advice and preparation of tax returns.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT SERVICES

AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITORS

Registrant has no audit committee as such. Registrant’s policy is to pre-approve all audit and permissible non-audit services performed by the independent public accountants.  These services may include audit services, audit related services, tax services and other services.  For audit services, the independent auditor provides an engagement letter in advance of the services  outlining the scope of the audit and related audit fees.  If agreed by Registrant, this engagement letter is formally accepted by Registrant.

For all services, Registrant’s supervisory management staff submits from time to time to the Agents of Registrant for approval services that it recommends the Registrant engage the independent auditor to provide.  In addition, the Agents of Registrant pre-approve specific non-audit services that the independent auditor is authorized to provide.  All fee proposals for those non-audit services must be pre-approved in writing by a senior executive of the Supervisor.  The Agents of Registrant are informed routinely by the independent auditor pursuant to this pre-approved process.

 

  

Item 15.

Exhibits and Financial Statement Schedules 

(a)(1) Financial Statements

(2) Financial Statement Schedules

The consolidated financial statements and the financial statement schedule of the Registrant and the financial statements of the Sublessee required in this annual report are listed in the respective indexes to those financial statements and financial statement schedule of the Registrant and the Sublessee included immediately following Exhibit 32.2.

(3) Exhibits: See Exhibit Index.

                                                                                                                                                                                                                                                      

 

Empire State Building Associates L.L.C.

December 31, 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 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 as Exhibit 10(d) to 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 andFebruary 11, 2010 by Sublessee for the period January 5, 2013 to January 5, 2076 which is being filed as Exhibit 10 (e) to Registrant’s Form 10-K for the fiscal year ended December 31, 2009

 

 

10 (f)

Amendment to Registrant’s Operating Agreement as of July 1, 2010 which is being filed as Exhibit 10 (f) to Registrant’s Form 10-K for the fiscal year ended December 31, 2009

 

 

24

Powers of Attorney dated October 13, 2003Between the Partners of Registrant and Mark Labell which was filed as Exhibit 24 to Registrant’s 10-Q for the quarter ended September 30, 2003 and is incorporated herein by reference.

 

 

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

 

·

Page references are based on sequential numbering system.

                                                                                                                                                                                                                                                

Empire State Building Associates L.L.C.

December 31, 2009

SIGNATURE

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 Powers of Attorney, dated October 13, 2003 (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: October 5, 2010

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: October 5, 2010

_________________________________

*

Mr. Labell supervises accounting functions for Registrant.

Empire State Building Associates L.L.C.

December 31, 2009

                                                                                                                                                                                                                                             

**Exhibit 31.1**

**CERTIFICATIONS**

I, Mark Labell, certify that:

1.

I have reviewed this report on Form 10-K of Empire State Building Associates L.L.C.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.

The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

(a)    Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.

The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls over financial reporting.

Date: October 5, 2010

By /s/ Mark Labell

Name:

Mark Labell 

Title:

Senior Vice President, Finance 

Malkin Holdings LLC, Supervisor of 

Empire State Building Associates L.L.C.

Registrant’s organizational documents do not provide for a Chief Executive Officer or other officer with equivalent rights and duties.  As described in the Report, Registrant is a limited liability company which is supervised by Malkin Holdings LLC.  Accordingly, this Chief Executive Officer certification is being signed by a senior executive of Registrant’s supervisor.

                                                                                                                                                                                                                                        

Empire State Building Associates L.L.C.

December 31, 2009

**Exhibit 31.2**

**CERTIFICATIONS**

I, Mark Labell, certify that:

1.

I have reviewed this report on Form 10-K of Empire State Building  Associates L.L.C.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.

The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

(a)

Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

 

5.

The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls over financial reporting.

Date: October 5, 2010

By /s/ Mark Labell

Name: Mark Labell 

Title: Senior Vice President, Finance 

Malkin Holdings LLC, Supervisor of 

Empire State Building Associates L.L.C.

Registrant’s organizational documents do not provide for a Chief Financial Officer or other officer with equivalent rights and duties.  As described in the Report, Registrant is a limited liability company which is supervised by Malkin Holdings LLC.  Accordingly, this Chief Financial Officer certification is being signed by a senior member of the financial/accounting staff of Registrant’s supervisor

 

                                                                                                                                                                           

Empire State Building Associates L.L.C.

December 31, 2009

 **Exhibit 32.1**

**Empire State Building Associates L.L.C.**

**Certification Pursuant to 18 U.S.C., Section 1350 as adopted**

**Pursuant to Section 906**

**of Sarbanes – Oxley Act of 2002**

The undersigned, Mark Labell, is signing this Chief Executive Officer certification as  Senior Vice President, Finance of Malkin Holdings LLC, the Supervisor * of Empire State Building Associates L.L.C. (“Registrant”) to certify that:

1.

the Annual Report on Form 10-K of Registrant for the period ended December 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.78m or 78o(d)); and

2.

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

Dated: October 5, 2010

By /s/ Mark Labell

Mark Labell

Senior Vice President, Finance

Malkin Holdings LLC, Supervisor 

*Registrant’s organizational documents do not provide for a Chief Executive Officer or other officer with equivalent rights and duties.  As described in the Report, Registrant is a limited liability company which is supervised by Malkin Holdings LLC.  Accordingly, this Chief Executive Officer certification is being signed by a senior executive of Registrant’s supervisor.

                                                                                                                                                                                                                                         

Empire State Building Associates L.L.C.

December 31, 2009

**Exhibit 32.2**

**Empire State Building Associates L.L.C.**

**Certification Pursuant to 18 U.S.C., Section 1350 as adopted**

**Pursuant to Section 906**

**of Sarbanes – Oxley Act of 2002**

The undersigned, Mark Labell, is signing this Chief Financial Officer certification as a senior member of the financial/accounting staff of Malkin Holdings LLC, the Supervisor* of Empire State Building Associates L.L.C. (“Registrant”), to certify that:

1.

the Annual Report on Form 10-K of Registrant for the period ended December 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.78m or 78o(d)); and

2.

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

Dated: October 5, 2010

By /s/ Mark Labell 

Mark Labell 

Senior Vice President, Finance

Malkin Holdings LLC, Supervisor

*Registrant’s organizational documents do not provide for a Chief Financial Officer or other officer with equivalent rights and duties.  As described in the Report, Registrant is a limited liability company which is supervised by Malkin Holdings LLC.  Accordingly, this Chief Financial Officer certification is being signed by a senior member of the financial/accounting staff of Registrant’s supervisor.  

                                                                                                                                                                                                                                           

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

EMPIRE STATE BUILDING ASSOCIATES L.L.C.

(A Limited Liability Company)

Report of Margolin, Winer & Evens LLP -- Independent Registered Public Accounting Firm 

Consolidated Balance Sheets as of December 31, 2009 and 2008 

Consolidated Statements of Income for the Years Ended December 31, 2009 and 2008  

Consolidated Statements of Members’ Equity for the Years Ended December 31, 2009 and 2008 

Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and 2008 

Notes to Consolidated Financial Statements 

SCHEDULE III - Real Estate and Accumulated Depreciation as of December 31, 2009 

All other schedules are omitted as the information is not required, is not material or is otherwise provided.

                                                                                                                                                                                                                      

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Empire State Building Associates L.L.C.

(a Limited Liability Company)

We have audited the accompanying consolidated balance sheets of Empire State Building Associates L.L.C. ("Associates") as of December 31, 2009 and 2008 and the related consolidated statements of income, members' equity and cash flows for the years then ended, and the supporting financial statement schedule, Schedule III- Real Estate and Accumulated Depreciation for the year ended December 31, 2009, also included in this Form 10-K.  These consolidated financial statements and the schedule are the responsibility of Associates' management.  Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Empire State Building Associates L.L.C. as of December 31, 2009 and 2008 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America, and the related financial statement schedule for the year ended December 31, 2009, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

                                   

  /s/  Margolin, Winer & Evens LLP

Garden City, New York

October 5, 2010

                                                                                                                                                                                                                                     

EMPIRE STATE BUILDING ASSOCIATES L.L.C.

(A Limited Liability Company)

CONSOLIDATED BALANCE SHEETS

 

            December 31,

**Assets**

        2009

  2008

Real estate:

 

 

 

Building:

 

 

 

Empire State Building, located at

350 Fifth Avenue, New York, N. Y.

$38,933,801

$38,933,801

 

Less: Accumulated depreciation

7,696,045

  6,697,782

 

 

 31,237,756

 32,236,019

 

 

 

 

 

Building improvements

10,162,577

-

 

Less: Accumulated depreciation

      150,666 

                 -

 

 

10,011,911

                 -

 

Land

21,550,588

21,550,588

 

Total real estate, net

62,800,255

53,786,607

 

 

 

Cash and cash equivalents

28,531,544

9,649,212

Restricted cash re: mortgage interest 

714,839

879,781

Rent due from sublessee

16,181

9,384

Receivable from participants - NYS estimated tax

103,715

       79,315

Due from sublessee

8,961,815

-

Other assets

100,000

-

 

 

 

Mortgage financing costs

3,358,658

1,796,287

Less: accumulated amortization

  1,790,448

 1,205,009

 

Mortgage financing costs, net

  1,568,210

   591,278

 

 

 

 

Total assets

$102,796,559

$64,995,577

**Liabilities and members’ equity**

Liabilities:

 

Mortgages payable 

$92,000,000

$60,500,000

 

Accrued mortgage interest 

      514,944

      338,632

 

Additional rent due to sublessee

2,429,589

-

 

Accrued supervisory fees

     214,591

                -

 

Total liabilities

95,159,124

60,838,632

Commitments and contingencies

-

-

Members' equity 

  7,637,435

  4,156,945

 

 

 

 

 

Total liabilities and members’ equity

$102,796,559

$64,995,577

See accompanying notes to consolidated financial statements.

                                                                                                                                                                                                                                      

EMPIRE STATE BUILDING ASSOCIATES L.L.C.

(A Limited Liability Company)

CONSOLIDATED STATEMENTS OF INCOME

 

 

Year ended December 31,

 

 

 

 

2009

2008

**Revenue:**

 

 

 

Rental income, from a related party

$15,379,592

$9,528,134

 

Dividend and interest income

       49,985

    216,802

Total revenue

 15,429,577

 9,744,936

 

 

 

**Expenses:**

 

 

 

Interest on mortgages 

5,801,431

3,998,042

 

Supervisory services, to a related party 

374,008

159,417

 

Depreciation of building and improvements

1,148,929

998,262

 

Amortization of mortgage financing costs

585,439

179,629

 

Professional fees and miscellaneous, including amounts paid to a related party 

   149,947

   212,683

 

 

 

 

 

Total expenses

8,059,754

5,548,033

 

 

 

 

 

**Net income**

 $7,369,823

 $4,196,903

 

 

 

Earnings per $10,000 participation unit, based

 on 3,300 participation units outstanding

 during each year

$2,233

$1,272

See accompanying notes to consolidated financial statements.

 

                                                                                                                                                                                                                                        

  

EMPIRE STATE BUILDING ASSOCIATES L.L.C.

(A Limited Liability Company)

CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY

 

 

 

 

 

 

Members’

Share of

 

Members’

 

Equity

Net Income

 

Equity

 

January 1,

For Year

Distributions

December 31,

 

 

 

 

 

Year Ended December 31, 2008:

 

 

 

 

Anthony E. Malkin Group

$5,739,973

$1,398,968

$5,753,293

$1,385,648

 

 

 

 

 

Thomas N. Keltner, Jr. Group

5,739,973

1,398,968

5,753,292

1,385,649

 

 

 

 

 

Peter L. Malkin Group

    5,739,973

    1,398,967

    5,753,292

    1,385,648

TOTALS

$17,219,919

$4,196,903

$17,259,877

$4,156,945

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2009:

 

 

 

 

Anthony E. Malkin Group

$1,385,648

$2,456,608

$1,296,445

$2,545,811

 

 

 

 

 

Thomas N. Keltner, Jr. Group

1,385,649

2,456,608

1,296,444

2,545,813

 

 

 

 

 

Peter L. Malkin Group

   1,385,648

   2,456,607

    1,296,444

   2,545,811

TOTALS

$4,156,945

$7,369,823

$3,889,333

$7,637,435

See accompanying notes to consolidated financial statements.

                                                                                                                                                                         

EMPIRE STATE BUILDING ASSOCIATES L.L.C.

(A Limited Liability Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Year Ended December 31,

 

2009

2008

**Cash flows from operating activities:**

 

Net income

$7,369,823

$4,196,903

 

Adjustments to reconcile net income to net 

  cash provided by operating activities:

 

     Depreciation of building and improvements

1,148,929

998,262

 

     Amortization of mortgage financing costs

585,439

179,629

 

     Changes in operating assets and liabilities:

 

 

 

       Rent due from sublessee

(6,797)

-

 

Additional rent due to/from sublessee

2,429,589

(983,635)

 

       Accrued mortgage interest

176,312

-

 

 

   Accrued supervisory services, to a related party

      214,591

  (853,439)

 

 

        Net cash provided by operating activities

 11,917,886

  3,537,720

 

**Cash flows from investing activities:**

 

Purchase of building improvements and

 

 

 

improvements in progress

 (10,162,577)

               -

 

Advances to sublessee to fund building improvements 

   (8,961,815)

               -

 

Net cash used in investing activities

 (19,124,392)

               -

 

 

 

**Cash flows from financing activities:**

 

 

 

Change in receivable from participants

(24,400)

200,122

 

Change in restricted cash

164,942

9,754

 

Financing costs

(1,562,371)

-

 

Proceeds of second mortgage

31,500,000

-

 

Distributions to participants

(3,889,333)

(17,259,877)

 

Change in other assets

    (100,000)

                    -

 

   Net cash provided by (used in) financing activities

  26,088,838

 (17,050,001)

 

 

 

Net change in cash and cash equivalents

18,882,332

(13,512,281)

 

 

 

Cash and cash equivalents, beginning of year

 9,649,212

 23,161,493

 

 

 

Cash and cash equivalents, end of year

$28,531,544

$9,649,212

 

Supplemental disclosure of cash flow information:

 

Cash paid for interest

$5,625,119

$3,998,042

See accompanying notes to consolidated financial statements.

                                                                                                                                                                                                                                           

EMPIRE STATE BUILDING ASSOCIATES L.L.C.

(A Limited Liability Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Business Activity and Purchase of Real Estate

Through April 16, 2002, Empire State Building Associates L.L.C. ("Associates") owned the tenant's interest in a master operating leasehold (the "Master Lease") on the Empire State Building (the "Building"), located at 350 Fifth Avenue, New York, New York. On April 17, 2002 Associates acquired, through a wholly-owned limited liability company, the fee title to the Building and to the land thereunder (the "Land"), (together, the "Real Estate"). Associates subleases the property to Empire State Building Company L.L.C. ("Sublessee"). The consolidated financial statements include the accounts of Associates and, effective April 17, 2002, its wholly-owned limited liability company, Empire State Land Associates L.L.C. All intercompany accounts and transactions have been eliminated in consolidation.

2.   Summary of Significant Accounting Policies

 

 

       a.       Cash and Cash Equivalents

Cash and cash equivalents include investments in money market funds and all highly liquid debt instruments with an original maturity of three months or less when acquired. 

b.

Restricted Cash

Restricted cash at December 31, 2009 and 2008 includes a money market account held at Capital One Bank pursuant to the terms of the first mortgage, to be used monthly to satisfy a portion of the mortgage interest obligation.

       c.       Use of Estimates: 

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

The real estate industry has historically been cyclical and sensitive to changes in economic conditions such as interest rates, credit availability and unemployment levels. Changes in these economic conditions could affect the assumptions used by management in preparing the accompanying financial statements.

 

       d.     Real Estate and Depreciation

The Real Estate is carried in the financial statements at its historical cost of $60,484,389. The Building and Building improvements are being depreciated on the straight-line basis over their estimated useful lives of 39 years. Under the terms of the April 17, 2002 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 Associates incurs no leasehold rent expense after acquiring the Real Estate. 

e.

    Mortgage Financing Costs and Amortization

Mortgage financing costs, totaling $3,358,658, are being amortized ratably over the lives of the respective mortgages.

f.

     Revenue Recognition

Basic rental income, as defined in a long-term lease, is a fixed minimum annual amount that Associates records ratably over the year. Additional rent is based on 50% of the net operating profit of the Sublessee, as defined, in excess of $1,000,000 for each lease year ending December 31st and is recorded by Associates when such amounts become determinable, at the end of each calendar year.

g.

Valuation of Long-Lived Assets

Associates assesses the carrying amount of long-lived assets whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When Associates determines that the carrying amount of long-lived assets is impaired, the measurement of any impairment is based on a discounted cash flow method.

h.

      Income Taxes

Associates is organized as a limited liability company and is taxed as a partnership for income tax purposes. Accordingly, Associates is not subject to federal and state income taxes and makes no provision for income taxes in its financial statements. Associates taxable income or loss is reportable by its members.

Associates has determined that there are no material uncertain tax positions that require recognition or disclosure in its financial statements.

Taxable years ended December 31, 2006, December 31, 2007, December 31, 2008 and December 31, 2009 are subject to IRS and other jurisdictions tax examinations.

At December 31, 2009 and 2008 there are no differences between the tax bases and the reported amounts of Associates’ assets and liabilities.

i.

Recent Accounting Pronouncements 

In June 2009, the FASB issued FASB ASC Topic 105, Generally Accepted Accounting Principles*,*which establishes the FASB Accounting Standards Codification as the sole source of authoritative generally accepted accounting principles (“GAAP”) to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification will supersede all then-existing non-SEC accounting and reporting standards. The Codification did not change GAAP but reorganizes the literature.  Pursuant to the provisions of FASB ASC Topic 105, Associates has updated references to GAAP in its financial statements issued for the period ended December 31, 2009.  The adoption of FASB ASC Topic 105 did not impact Associates’ financial position or results of operations.

3.

     Mortgages Payable

a)

First Mortgage Payable 

To finance the acquisition of the fee title to the Real Estate (Note 1) and certain related costs, on April 17, 2002 Associates obtained a $60,500,000 first mortgage with Capital One Bank.  The mortgage is scheduled to mature on May 1, 2012 and requires monthly payments of interest only at 6.5% per annum.  The mortgage may be prepaid at any time after 24 months with the payment of a premium equal to the greater of (a) 1% of the amount prepaid and (b) an amount calculated pursuant to a prepayment formula designed to preserve the bank's yield to maturity. The mortgage is secured by a lien on the Real Estate and Associates' leasehold estate under the Master Lease of the Real Estate.

b)

Second Mortgage Payable

To finance improvements at the property and costs of the financing, on February 25, 2009 Associates borrowed $31,500,000 from Signature Bank.  The second mortgage is scheduled to mature on May 1, 2012 and requires monthly payments of interest only at 6.5% per annum.  The mortgage may be prepaid at any time without penalty and is secured by a lien on the Real Estate and Associates' leasehold estate under the Master Lease of the Real Estate. In connection with obtaining the second mortgage, Associates incurred costs of approximately $1,560,000.

The estimated fair value of Associates' mortgage debt, based on available market information was approximately $92,990,000 at December 31, 2009 and approximated its carrying value at December 31, 2008. 

4.

    Related Party Transactions - Rental Income 

Associates does not operate the Building (Note 1). It subleases the Building to the Sublessee, a related party (Note 5), pursuant to a net operating sublease which was set to expire on January 4, 2013. The sublease provided for three successive renewal options of twenty-one years each, at an  annual basic rent of $5,895,625 throughout all subsequent renewal terms. During 2010, Sublessee exercised the remaining renewal options for the period January 4, 2013 through January 4, 2076. In accordance with the 2nd lease modification dated February 25, 2009, the minimum basic rent described above has been increased to cover debt service on the $31,500,000 second mortgage.  The 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 (See Note 3).  

Additional rent through all renewal terms under the sublease is payable in an amount equal to 50% of the Sublessee’s annual net operating profit, as defined, in excess of $1,000,000. For 2009 and 2008, Sublessee reported net operating profit of $16,140,821 and $8,018,768, respectively. Therefore, rent income was comprised as follows:

 

       For the years ended December 31,

 

2009

2008

        Minimum net basic rent

$ 6,018,750

$  6,018,750

        Basic rent increase

1,790,431

-

        Additional rent earned

  7,570,411

  3,509,384

 

$15,379,592

$9,528,134

Sublessee advanced $10,000,000 through December 31, 2009 on account of additional rent and the excess, $2,429,589 was returned by Associates in 2010.

Real estate taxes paid directly by the Sublessee for the years ended December 31, 2009 and 2008 totaled $24,785,578 and $22,677,230, respectively.

The following is a schedule of future minimum rental income (assuming that the Sublessee does not surrender the Sublease):

Year ending

 

 

 

December 31,

 

 

 

2010

 

$8,095,000

 

2011

 

8,095,000

 

2012

 

6,710,000

*

2013

 

        5,900,000

*

2014

 

5,900,000

*

Thereafter

 

360,300,000

*

 

 

$395,000,000

 

*Associates intends to refinance the existing mortgages which mature on May 1, 2012. In accordance with the 2nd lease modification, basic rent will increase to include the required debt service on the refinanced mortgages. The above table does not reflect the additional basic rent that will result after April 2012 from the refinanced debt. The above table reflects all lease renewals described above.

5.

    Related Party Transactions - Supervisory and Other Services

Supervisory and other services are provided to Associates by its supervisor, Malkin Holdings LLC (“Malkin Holdings” or the “Supervisor”) (formerly Wien & Malkin LLC), a related party. Associates’ members consist of certain individuals who hold senior positions at Supervisor, each of whom also acts as an agent (collectively, the “Agents”) for holders of participations in his respective member interest in Associates. Beneficial interests in Associates are held directly or indirectly by one or more persons at Malkin Holdings and/or their family members. 

Associates pays Supervisor for supervisory services and disbursements. The basic fee (the "Basic Payment") has 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 Associates, effective July 1, 2010, of the expenses in connection with regular accounting services related to maintenance of Associates’ books and records. Such expenses were previously paid by Supervisor.  

In 2009, Malkin Holdings received $108,836 for special supervisory services at hourly rates on certain matters regarding financing, ownership, and operation of the Empire State Building, all representing Associates’ allocable portion of such fees to be paid directly and not borne indirectly through overage rent deductions. Malkin Holdings also receives an additional payment equal to 6% of distributions to the participants in Associates. For tax purposes, any additional payment is recognized as a profits interest and the Supervisor is treated as a partner, all without modifying each Participant’s distributive share of reportable income and cash distributions. Distributions in respect of Malkin Holdings’ profits interest totaled $214,591 for 2009 and $0 for 2008, respectively.

Malkin Holdings also serves as supervisor for Sublessee for which it receives a basic annual fee of $270,000. For the years ended December 31, 2009 and 2008, Malkin Holdings received $313,767 and $991,447, respectively, from the Sublessee in other service fees. Under separate agreements to which Sublessee is not a party, certain of Sublessee’s participants pay Malkin Holdings and members of Peter L. Malkin’s immediate family a percentage of distributions above an annual threshold. These third party payments (which totaled $1,460,306 in 2009 to Malkin Holdings and such Malkin family members) do not impose any obligation upon Sublessee or affect its assets and liabilities.

6.

  Number of Participants

There were 2,790 and 2,770 participants in the participating groups at December 31, 2009 and 2008, respectively.

7.

   Determination of Distributions to Participants

Distributions to participants during each year generally reflect the excess of the current year's minimum annual rent income, plus additional rent income and dividend income earned in the prior year, over the cash expenses and mortgage requirements of the current year, adjusted for those cash reserves management judges to be suitable under the circumstances.

8.

Distributions and Amount of Income per $10,000 Participation Unit

Distributions per $10,000 participation unit during the years ended December 31, 2009 and 2008, based on 3,300 participation units outstanding during each year, consisted of the following:

 

Year ended December 31

 

2009

2008

 

 

Income

$1,179

$1,272

 

 

Return of capital

         -

   3,958

 

 

    Total distributions

$1,179

$5,230

 

9.

Related Party Transactions – Fees 

The accompanying statements of income reflect fees paid or owed to Malkin Holdings, a related party ( Note 5), as follows:

 

     2009

      2008

 

 

 

        Payments made or accrued

$ 108,836

$           -

 

 

 

10.

    Contingencies

Malkin Holdings LLC and Peter L. Malkin, a member in Associates, 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, Associates’ allocable share of such costs is as yet undetermined, and Associates has not provided for the expense and related liability with respect to such costs in its consolidated financial statements.  As a result of the August 29, 2006 settlement agreement which included termination of this proceeding, Associates will not recognize any gains or losses from this proceeding other than the possible charges for the aforementioned fees and expenses.

The 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 the non-retail space since October 21, 2009.  

11.

Concentration of Credit Risk

 

 

 

              December 31

Cash and cash equivalents consist of the following:

2009

2008

JPMorgan Chase Bank

$     49,338

$     40,645 

Signature Bank

141,295

-

Distribution account held by Malkin Holdings LLC

324,111

324,111

Fidelity U.S. Treasury Income Portfolio

  28,016,800

  9,284,456

           Total cash and cash equivalents

$28,531,544

$9,649,212

 

Associates maintains cash and cash equivalents (including restricted cash) in three banks, in money market funds (Capital One Bank and Fidelity U.S. Treasury Income Portfolio) and a distribution account held by Malkin Holdings. The Federal Deposit Insurance Corporation (“FDIC”) insures each bank account up to $250,000. In addition, under the FDIC’s Transaction Account Guarantee Program, through December 31, 2009, all noninterest-bearing accounts are fully guaranteed by the FDIC. At December 31, 2009, all bank accounts, other than the distribution account, are fully insured. The funds (approximately $324,000 at December 31, 2009) held by Malkin Holdings in the distribution account were paid to the participants on January 1, 2010. Funds in the money market funds (approximately $28,299,000) were not insured at December 31, 2009.

12.

Building Improvements Program

In 2008, the participants of Associates and the members in Sublessee consented to a building improvements program (the "Program") with an initial borrowing of $31,500,000 and authorization for possible future refinancings of this new mortgage debt. To finance improvements to the Real Estate and costs of financing, on February 25, 2009 Associates borrowed $31,500,000 from Signature Bank (Note 3). In accordance with the 2nd lease modification dated February 25, 2009, basic rent described above has been increased to cover debt service on the $31,500,000 second mortgage (Note 3). As of December 31, 2009, Associates had incurred costs related to the Program of $10,162,577 and estimates that the Program upon completion will be approximately $626,000,000 including sprinkler work of approximately $23,000,000, required to be completed by 2019. Due from the Sublessee at December 31, 2009 represents advances made to Sublessee of $8,961,815 for building improvements. The costs of the Program will be financed by the new $31,500,000 second mortgage, possible future refinancings and Lessee’s operating cash flow. 

The Sublessee is advancing costs of the Program and is reimbursed by Associates from available financing. The Program (1) grants the ownership of the improvements to Associates to the extent of its reimbursements to Sublessee and (2) allows for the increased mortgage charges to be paid by Associates from an equivalent increase in the basic rent paid by the Sublessee to Associates. Since any additional rent will be decreased by one-half of that amount, the net effect of the lease modification is to have Associates and the Sublessee share the costs of the Program equally, assuming additional rent continues to be earned.

                                                                                                                                                                                                                                           

 

               SCHEDULE III

EMPIRE STATE BUILDING ASSOCIATES L.L.C.

(A Limited Liability Company)

Real Estate and Accumulated Depreciation

December 31, 2009

Column

 

A 

Description

Land and building situated

.

at 350 Fifth Avenue, New York, New York

B

 

Encumbrances -

 

 

Capital One Bank and Signature Bank

 

 

Balance at December 31, 2009

$92,000,000

 

C

 

Initial cost to company

 

Land and building

$60,484,389

 

D

 

Cost capitalized subsequent to acquisition

                   Building improvements

$10,162,577

 

 

E

 

Gross amount at which carried at

 

close of period (See Note 2 of Notes to Consolidated Financials Statements)

 

Land

$21,550,588

 

Building and improvements

  49,096,378

 

Total

$70,646,966

(a)

 

F

 

Accumulated depreciation

$  7,846,711     (b)

 

G

Date of construction

1931

 

H

Date acquired

April 17, 2002

 

 

I

Life on which depreciation of building in 

latest income statements is computed

      

    39 years

(a)

Gross amount of real estate

 

 

 

Balance at January 1, 2009

$60,484,389

 

Purchase of real estate: improvements

  

 

F/Y/E 12/31/09

   10,162,577 

 

Balance at December 31, 2009

  $70,646,966 

 

The costs for federal income tax purposes are the same 

as for financial statement purposes.

 

(b)

Accumulated depreciation

 

 

 

Balance at January 1, 2009

$6,697,782

 

 

Depreciation: F/Y/E 12/31/09

  1,148,929

 

 

Balance at December 31, 2009

$7,846,711