By Craig Karmin
The Empire State Building’s income is poised to double within four years and more than triple by 2026, according to a new securities filing related to the proposed public sale of the building.
The surge in income comes amid a $550 million upgrade to the building. The Malkins, the New York real estate family that manages the skyscraper and is spearheading the initial public offering, has been combining the more than 850 office spaces in the building in an effort to attract larger and higher-paying tenants.
That effort, which has restored the lobby and upgraded the 81-year old building to make it more energy efficient, is already starting to pay off with new tenants like Swedish construction company Skanska and Air China.
The building’s net operating income is projected to rise to $160.6 million in June 2015, up from $76.8 million in June 2012, according to Securities and Exchange documents filed on Monday. Income is seen rising to $248.5 million by 2026, and balloons to $422 million by 2041.
Rental income at the Empire State Building has been largely flat for the past several years, though the observation deck has been profitable. The new income projections do not provide separate figures for the observation deck.
This long-anticipated rise in the building’s income has caused some of the 2,800 current investors in the Empire State building to wonder if they would be better off from an IPO or by voting against it. The proposed plan requires 80% of the shares to approve it.
The projections are based on a discounted cash-flow analysis conducted by Duff & Phelps, which has issued its opinion that these valuations are fair to investors, according to the securities filings.
The new public company, which will be known as Empire State Realty Trust, would roll up the iconic building with 17 other Malkin properties. The Empire State Building has been valued at $2.52 billion of the new company’s $4 billion valuation, according to securities filings.
The filings released today are the first time the Malkins have made public income forecasts for the Empire State Buildings and the other properties.
The Malkins have told investors that the status quo for the Empire State Building is not possible because Leona Helmsley’s estate, which has a stake valued at $1 billion, needs to cash out its position in the building’s operating company. Their other buildings are also projected to see rising incomes, filings show.