1. Remove the rear ashtray
2. At the bottom of the tray are two plastic phillips screws, remove them and their sleeves
3. Remove the tray (3) in your diagram - there may be a light wire, disconnect it
4. On either side of the armrest hinge there are springs. Take a picture so you know how each spring is oriented. Using pliers, twist the vertical wire part of the spring until it aligns with the notches and pull through the notches
5. Pull the center plastic plug that serves as a hinge pin from either side.

6. Remove the armrest
7. Remove the half-moon hinge cover - it just pulls off - then separate the two parts by pushing the button and opening.

If you need to separate the actual leather pad, then under the leather portion are two 1/4" plastic caps on the hinge side. Use a small pick to pry them out and expose the screws. Unscrew to separate pad from tray.

The rest is pretty self-explanatory - reverse to re-install.

Good luck!

 

I found a few youtube vids that show the process you described for removing the top cover of the armrest. I am still a bit unclear about how the bottom tray comes apart after the upper armrest is removed. The part appears to have a curved "tongue" that somehow wraps around a pivot point. In the exploded diagram I posted, it looks like there is a roller or bushing of some sort (parts 9 and 11) So, I guess my question is what's next after the top cover is removed like the vid capture shown below.

 

I thought I would answer my own question, in case anyone else needs to replace this tray. It was a lot clearer once I got the replacement, that this just snaps into place. No need to remove the upper console, just some prying to remove the old tray, and snapping in the new one. The "tongue" is just to cover the hinge behind the tray.

 

The tray part # 51168228810 is for the black trim. The tab that extends over the back should match the interior.

https://www.ecstuning.com/b-genuine-bmw-parts/storage-tray-schwarz/51168228810/?gclid=Cj0KCQiApKagBhC1ARIsAFc7Mc7SwzAMI99aZkPZOEv9HqEnMBw7z_qv42dNOoy7WKibkFXtUBsBRK0aAvwsEALw_wcB