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Empire State Building Investors Again Sue Owners Over IPO
By Kaitlin Ugolik
Law360, New York (January 06, 2014, 7:06 PM ET) -- The managers of the Empire State Building and the real estate investment trust recently created to hold it and a slew of other properties were hit with a proposed class action in New York state court Monday over their alleged refusal to entertain third-party bids for the building before rolling it into the REIT.
It's the second such suit filed against the board of Empire State Realty Trust Inc. and Malkin Holdings LLC in as many weeks, brought by members of Empire State Building Associates LLC who claim their shares in the Empire State Building are worth much more than what they will see as a result of its connection with ESRT.
The Malkins had various opportunities to sell the building for up to $2 billion, but refused, allegedly threatening to buy out for $100 per share any shareholders who voted “no” on their plan and throwing away opportunities that would have been much better for shareholders for their own personal gain.
“The Malkin defendants refused to meet with any of the bidders and, to the best of plaintiffs' knowledge, never had one substantive word of dialogue with them,” the suit said. “Instead, they moved forward with the ESRT consolidation transaction — because of the hundreds of millions in self-dealing benefits the Malkin defendants stood to reap from the ESRT consolidation transaction — paying lip service to, but in reality wantonly breaching, their fiduciary duties to ESBA participants.”
The Malkins planned the REIT roll-up and subsequent initial public offering in February 2012, and were almost immediately hit with several lawsuits accusing them of breaching fiduciary duty in connection with the planned $1 billion deal. The plan neared the required number of "yes" votes from shareholders last summer, and several sky-high bids quickly followed.
Investor Rubin Schron offered $2 billion for the building in June, followed shortly byanother $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 for ESRT.
“Though the ESB offers were from well-heeled investors and would yield the ESBA participants at least $500 million more than they would realize in the consolidation, the Malkin defendants never seriously considered any of the ESB offers,” the complaint said.
In fact, the plaintiffs believe that none of the defendants or their attorneys ever even discussed the bids with the bidders, failing to ascertain whether they might be willing to offer an even higher price, according to the suit.
The plaintiffs allege that the Malkins avoided meeting with or speaking to the bidders because they did not offer the same “self-dealing” benefits that the REIT/IPO deal would yield.
“It is thus clear that the Malkin defendants, while paying lip service to their fiduciary duties, in reality forced the ESBA participants to forgo a staggering $500 million, just so the Malkin defendants could line their own pockets and Anthony Malkin could say he was chairman, CEO and president of a publicly traded REIT,” the suit said.
The proposed class is represented by Stephen Meister, James Ringer and Remy Stocks ofMeister Seelig & Fein LLP.
Counsel information for the defendants was not immediately available Monday.
Case information was not immediately available.
--Editing by Andrew Park.
http://www.law360.com/realestate/articles/499039/empire-state-building-investors-again-sue-owners-over-ipo
a Nexis Lexis Company
Empire State Building Investors Again Sue Owners Over IPO
By Kaitlin Ugolik
Law360, New York (January 06, 2014, 7:06 PM ET) -- The managers of the Empire State Building and the real estate investment trust recently created to hold it and a slew of other properties were hit with a proposed class action in New York state court Monday over their alleged refusal to entertain third-party bids for the building before rolling it into the REIT.
It's the second such suit filed against the board of Empire State Realty Trust Inc. and Malkin Holdings LLC in as many weeks, brought by members of Empire State Building Associates LLC who claim their shares in the Empire State Building are worth much more than what they will see as a result of its connection with ESRT.
The Malkins had various opportunities to sell the building for up to $2 billion, but refused, allegedly threatening to buy out for $100 per share any shareholders who voted “no” on their plan and throwing away opportunities that would have been much better for shareholders for their own personal gain.
“The Malkin defendants refused to meet with any of the bidders and, to the best of plaintiffs' knowledge, never had one substantive word of dialogue with them,” the suit said. “Instead, they moved forward with the ESRT consolidation transaction — because of the hundreds of millions in self-dealing benefits the Malkin defendants stood to reap from the ESRT consolidation transaction — paying lip service to, but in reality wantonly breaching, their fiduciary duties to ESBA participants.”
The Malkins planned the REIT roll-up and subsequent initial public offering in February 2012, and were almost immediately hit with several lawsuits accusing them of breaching fiduciary duty in connection with the planned $1 billion deal. The plan neared the required number of "yes" votes from shareholders last summer, and several sky-high bids quickly followed.
Investor Rubin Schron offered $2 billion for the building in June, followed shortly byanother $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 for ESRT.
“Though the ESB offers were from well-heeled investors and would yield the ESBA participants at least $500 million more than they would realize in the consolidation, the Malkin defendants never seriously considered any of the ESB offers,” the complaint said.
In fact, the plaintiffs believe that none of the defendants or their attorneys ever even discussed the bids with the bidders, failing to ascertain whether they might be willing to offer an even higher price, according to the suit.
The plaintiffs allege that the Malkins avoided meeting with or speaking to the bidders because they did not offer the same “self-dealing” benefits that the REIT/IPO deal would yield.
“It is thus clear that the Malkin defendants, while paying lip service to their fiduciary duties, in reality forced the ESBA participants to forgo a staggering $500 million, just so the Malkin defendants could line their own pockets and Anthony Malkin could say he was chairman, CEO and president of a publicly traded REIT,” the suit said.
The proposed class is represented by Stephen Meister, James Ringer and Remy Stocks ofMeister Seelig & Fein LLP.
Counsel information for the defendants was not immediately available Monday.
Case information was not immediately available.
--Editing by Andrew Park.
http://www.law360.com/realestate/articles/499039/empire-state-building-investors-again-sue-owners-over-ipo
