Empire State Building REIT Said to End Archaic Structure
By David M. Levitt 
Bloomberg
January 29, 2013 12:35 PM EST
 

A plan to put the Empire State Building into a real estate investment trust will provide simpler management and better access to capital, said Anthony Malkin, president of the company that controls the tower.

The current ownership is “a very inefficient, archaic structure, mostly established by my grandfather for tax purposes,” Malkin said in an interview today on Bloomberg Television’s “In The Loop” with Betty Liu. “It was a way to avoid double taxation and providing a shield from liability for the small investor.”

Malkin is seeking the votes of more than 2,700 investors in the Empire State Building in a solicitation that began last week as he aims to form the REIT and take it public. Some beneficiaries of the company that owns the skyscraper have mounted a campaign to oppose the plan, claiming it shortchanges them. Malkin, in his first public comments about the proposed initial public offering, said today that many of the arguments put forth by two dissidents, cousins Richard and Steve Edelman, are “lies and deceptions.”

A separate group of Empire State Building co-investors today filed a lawsuit in New York State Supreme Court to block a $55 million settlement reached with another set of holders. Stephen Meister, attorney for the plaintiffs, said in the filing that the settlement is “grossly inadequate and unfairly apportioned.”

Malkin declined to comment on the lawsuit after the television interview.

A spokeswoman, Brandy Bergman, said the lawsuit isn’t a setback for the IPO.

“This is a complicated transaction with lots of moving pieces and nothing which has happened has taken us by surprise,” she said in an e-mail. “Any comment we make will be to our investors, which will be filed with the SEC and ultimately will be made public.”

Richard Edelman operates a website critical of the offering. The information in his communications with investors is based directly on the Malkins’ filings with the Securities and Exchange Commission, he said in an e-mail today.

“This is a wonderful deal only if your name is Malkin or Helmsley,” he said.

Steve Edelman, who has conducted conference calls with investors, said he couldn’t immediately address Malkin’s comments.

Among the claims Richard Edelman has made is that representatives of the Malkins have misrepresented their voting rights by telling them that only a yes vote would guarantee that they keep the value of their shares. Malkin, in a Jan. 25 letter, told unitholders that was deceptive.

Richard Edelman is “not being truthful with our investors,” Bergman said. “Our documents are the fact set to which our investors should look for their information to assist them in making their decisions.”

To contact the reporter on this story: David M. Levitt in New York at [email protected]

To contact the editor responsible for this story: Kara Wetzel at [email protected]

Empire State Building IPO Faces Another Potential Setback

By Craig Karmin
Wall Street Journal

In another potential setback to the public sale of the Empire State Building, a group of investors late Monday asked a New York court to block a class action settlement that had paved the way for investors to vote on the sale.

The group of Empire State Building investors is trying to overturn that settlement. It plans to file its own complaint seeking damages of more than $800 million, nearly 15 times the amount of the class action settlement.

The Malkin family, which manages the Empire State Building and is spearheading the sales process, is looking to roll up the building with 20 of its other properties into a new real estate company known as Empire State Realty Trust.

In the fall, the Malkins settled a class action lawsuit by agreeing to pay $55 million, which would be distributed to investors in all buildings that would become part of the publicly-traded company.

The new group of investors say that the amount is too low and that any payment should go directly to owners of the Empire State building, not split among investors in the other properties.

“The proposed settlement is grossly unfair to the Empire State Building investors,” Stephen Meister, an attorney representing the investor group looking to block the settlement, said in an email. “They must have their own separate class and counsel.”

A spokeswoman for the Malkins said they declined to comment.

The new group will ask the New York State Supreme Court to consider their complaint, which says the proposed sale “arises from an unfair and tainted process that results in undervalued interest” for investors.

Many of their objections have been raised by investors previously. For example, the suit says the independent firm that appraised the value of the Empire State Building “assigned valuation figures based exclusively upon data provided by the Malkin defendants.”

The complaint also alleges that the IPO would provide the Malkins with $200 million in “excessive and unfair” fees related to projected future profits from the Empire State Building.

If the court approves the request, it could delay the Malkins plan for the IPO. It’s unclear how the court will respond.

The Malkins need 80% of the shares held by 2,800 investors to approve the REIT proposal. Investors have until at least the end of March to vote on the proposed sale.

The Malkins spent much of last year responding to criticism of their plan. While the family has told investors that opponents represent a minority view, it hasn’t stopped the Malkins from personally taking on some of the dissidents.

In a letter sent to investors dated Jan. 25, and filed with the Securities and Exchange Commission, the Malkins wrote about two prominent opponents to the plan:
“Richard Edelman and Steven Edelman have been and are making statements and assertions which are in our view nothing more than lies and deceptions.”

Richard Edelman said he used SEC documents, filed by the Malkins, “to support my argument.”

By Ilaina Jonas and Joseph Ax
Reuters

NEW YORK | Mon Jan 28, 2013 11:09pm EST


Jan 28 (Reuters) - A group of investors in the company that owns the Empire State Building filed a motion on Monday to block a proposed settlement of a lawsuit against a group looking to create a public company with the historic building as its centerpiece.

Several investors in Empire State Building Associates (ESBA), which owns the building, said their skyscraper and investment are vastly different than the other properties involved in the settlement. As such, they believe they should not be bound by the proposed settlement.

"The settlement is both grossly inadequate and unfairly apportioned," the filing in the New York State court said. "The ESBA investors must be treated as a separate class and must be independently represented."

Malkin Holdings LLC's plans to roll up more than 18 properties into the Empire State Realty Trust Inc, which would become publicly traded if the investors approve the roll-up.

Last year, investors in several of the properties sued to stop the plan, in part because they objected to the tax treatment they would face.

In October, Malkin Holdings and other defendants agreed to pay $55 million payment to settle the suit. Under the proposed agreement, which must receive court approval, the class participants have agreed to support roll-up and the proposed initial public offering. The payment and the settlement are conditional upon the approval of the roll-up and the IPO.

But the investors who objected to the settlement on Monday say they have different interests than investors in the other properties and should not be grouped in with them, according to court documents. They said they are being forced to trade their bond-like, low-risk participation units for high-risk equity shares. They also said the roll-up would dilute the brand of the Empire State Building, one of the world's most recognized skyscrapers.

A representative from Malkin Holdings declined to comment.

Many of the 2,800 investors in the Empire State Building are the children or grandchildren of the original investors who paid $10,000 apiece in 1961 to buy the lease on the property. The building was then subleased for 114 years to a joint venture between Lawrence Wein, a pioneer in real estate syndication ownership, and Harry Helmsley.

The Malkin Group is led by Peter Malkin, Wein's son-in-law, and Anthony Malkin, Wein's grandson. The Empire State Realty Trust was proposed after the Helmsley Trust said it needed to cash out its position.

http://www.reuters.com/article/2013/01/29/property-empirestatebuiding-idUSL1N0AY0M920130129

By Ilaina Jonas

NEW YORK | Tue Jan 22, 2013 11:32am EST


(Reuters) - The company that controls the Empire State Building has begun asking investors to vote on a plan to fold the iconic building into a new real estate investment trust (REIT) that will eventually be publicly traded, according to regulatory documents filed Tuesday.

Malkin Holdings LLC is asking investors in one of the world's most recognizable buildings to vote on the plan to make the building the centerpiece of more than 18 properties in Empire State Realty Trust Inc, according to a filing with the U.S. Securities and Exchange Commission.

The more than 2,800 investors have until March 25 to vote. Although investors in two other properties will also cast votes, the viability of the proposed REIT depends upon the inclusion of the Empire State Building.

If the Empire State Building investors approve the proposal, the new company will move ahead with its plan to become a publicly traded company, launching an initial public offering (IPO) of shares.

The REIT proposal has divided the Empire State investors. Some believe Malkin is getting too much from the split of the ownership at their expense, while others support the plan as a way to cash out of a long-term investment they inherited from parents and grandparents.

The 2,824 investors hold 3,300 units that originally were sold for $10,000 in 1961 in Empire State Building Associates, the company that owns the building. The investors were divided into three groups holding 1,100 units per group. The REIT plan requires the approval of holders of at least 80 percent of the units in each of the three groups.

The initial $10,000 investment is estimated to be worth about $323,803 or $358,670 depending upon how the initial investor opted to structure the investment more than 50 years ago, according to the filing. However, that could be different than ultimate value to be determined by the stock market if the IPO proceeds.

As of September 30, 2012, the Empire State Building's office space was 67.4 percent leased, with tenants including Coty Inc. Its retail space was 85.9 percent leased.

(Reporting by Ilaina Jonas; editing by Matthew Lewis)