http://www.law360.com/classaction/articles/501934/empire-state-building-roll-up-draws-500m-investor-suit
Empire State Building Roll-Up Draws $500M Investor Suit
Law360, New York (January 16, 2014, 3:26 PM ET) -- The managers of the Empire State Building were again sued Tuesday over their recent roll-up of the property into a public real estate investment trust, with a new class of investors claiming they lost hundreds of millions of dollars when alternatives to the deal were ignored.
A class of investors led by a trustee of the Brian A. Liles Living Trust echo the claims of several other groups who have sued Malkin Holdings LLC and its officers over the controversial transaction, arguing that the defendants improperly ignored several lucrative buyout offers in order to reap the most benefit for themselves.
“Despite fiduciary obligations owed to the participants, the defendants breached those obligations by pursuing a self interested consolidation and initial public offering plan that enriched themselves by hundreds of millions of dollars at the expense of the participants,” the complaint said.
After the Malkins announced the REIT roll-up and IPO in February 2012, they were almost immediately hit with a series of lawsuits, as well as several unsolicited bids for the Empire State Building.
Investor Rubin Schron offered $2 billion for the building in June, followed shortly by another $2 billion offer from an unnamed bidder.
Then Joseph Sitt's Thor Equities LLC made its own bid, later increasing it to $1.4 billionin September.
In total there were eight different bidders, but the bidding war came to a halt in October when, after rejecting all of the bids, the Malkins raised $930 million in their IPO.
The third-party buyouts would have yielded hundreds of millions more in value for the participants than they received through the REIT IPO deal, but eliminated hundreds of millions of dollars that the Malkins earned through the structure, the new class action claims.
The plaintiffs allege that the Malkins may also have chosen to ignore the third-party bids in order to keep control over the property, in part because they receive lucrative compensation for managing the building.
The defendants acted in bad faith, the plaintiffs argue, and investors are entitled to at least $500 million in damages.
At least two other suits have been filed against the Malkins in the weeks since the REIT IPO became official.
Most recently, members of Empire State Building Associates LLC sued the Malkins and the new REIT, known as Empire State Realty Trust Inc., on Jan. 6, arguing as the plaintiffs in the current suit do that the defendants breached their fiduciary duty by failing to even respond to the many third-party bids.
A representative for the defendants did not immediately respond to a request for comment Thursday.
The plaintiffs are represented by Mark Lebovitch, John Rizio-Hamilton and Katherine Stefanou of Bernstein Litowitz Berger & Grossman LLP and Lee Rudy, Michael Wagner and Tamara Gavrilova of Kessler Topaz Meltzer & Check LLP.
The case is Brian A. Lilies, as Trustee of the Brian A. Lilies Living Trust et al. v. Anthony E. Malkin et al., case number 650108/2013, in the Supreme Court of the State of New York, County of New York.
--Editing by John Quinn.
Empire State Building Roll-Up Draws $500M Investor Suit
Law360, New York (January 16, 2014, 3:26 PM ET) -- The managers of the Empire State Building were again sued Tuesday over their recent roll-up of the property into a public real estate investment trust, with a new class of investors claiming they lost hundreds of millions of dollars when alternatives to the deal were ignored.
A class of investors led by a trustee of the Brian A. Liles Living Trust echo the claims of several other groups who have sued Malkin Holdings LLC and its officers over the controversial transaction, arguing that the defendants improperly ignored several lucrative buyout offers in order to reap the most benefit for themselves.
“Despite fiduciary obligations owed to the participants, the defendants breached those obligations by pursuing a self interested consolidation and initial public offering plan that enriched themselves by hundreds of millions of dollars at the expense of the participants,” the complaint said.
After the Malkins announced the REIT roll-up and IPO in February 2012, they were almost immediately hit with a series of lawsuits, as well as several unsolicited bids for the Empire State Building.
Investor Rubin Schron offered $2 billion for the building in June, followed shortly by another $2 billion offer from an unnamed bidder.
Then Joseph Sitt's Thor Equities LLC made its own bid, later increasing it to $1.4 billionin September.
In total there were eight different bidders, but the bidding war came to a halt in October when, after rejecting all of the bids, the Malkins raised $930 million in their IPO.
The third-party buyouts would have yielded hundreds of millions more in value for the participants than they received through the REIT IPO deal, but eliminated hundreds of millions of dollars that the Malkins earned through the structure, the new class action claims.
The plaintiffs allege that the Malkins may also have chosen to ignore the third-party bids in order to keep control over the property, in part because they receive lucrative compensation for managing the building.
The defendants acted in bad faith, the plaintiffs argue, and investors are entitled to at least $500 million in damages.
At least two other suits have been filed against the Malkins in the weeks since the REIT IPO became official.
Most recently, members of Empire State Building Associates LLC sued the Malkins and the new REIT, known as Empire State Realty Trust Inc., on Jan. 6, arguing as the plaintiffs in the current suit do that the defendants breached their fiduciary duty by failing to even respond to the many third-party bids.
A representative for the defendants did not immediately respond to a request for comment Thursday.
The plaintiffs are represented by Mark Lebovitch, John Rizio-Hamilton and Katherine Stefanou of Bernstein Litowitz Berger & Grossman LLP and Lee Rudy, Michael Wagner and Tamara Gavrilova of Kessler Topaz Meltzer & Check LLP.
The case is Brian A. Lilies, as Trustee of the Brian A. Lilies Living Trust et al. v. Anthony E. Malkin et al., case number 650108/2013, in the Supreme Court of the State of New York, County of New York.
--Editing by John Quinn.
