24 Aug 2012
It would appear that all may not be running smoothly with plans to float New York’s iconic Empire State Building, once the world’s tallest skyscraper.
A recent story on The Wall Street Journal’s Developments blog [http://on.wsj.com/NH3e8p ] cited documents filed with the US Securities and Exchange Commission this month that predicted the building’s net operating income is projected to rise to $160.6m in June 2015, up from $76.8m in June this year.
The building is managed by Malkin Holdings within one of three limited liability companies that between them house more than a dozen property holdings. Malkin wants to consolidate the three LLCs into a single real estate investment trust called Empire State Realty Trust, which would then sell shares to the public via an initial public offering.
Duff & Phelps, which is acting as Malkin’s valuation firm, estimates the entities that hold the buildings that would be put into the trust are worth a combined $3.99bn, with the Empire State Building accounting for roughly $2.5bn of that figure, according to a story on Bloomberg.
The problem is that, while punchy income projections and the brand allure of the Empire State Building will no doubt prove attractive to potential new investors through the IPO, that same combination is threatening to scupper the IPO plan because some existing investors in the building, which has a fairly complex ownership structure, are starting to wonder whether the wild swings of the stock markets would be a better bet than sitting on the unit holdings that they currently own.
Lawyer Lawrence Wien and more than 2,000 other people purchased what was then the world’s tallest skyscraper in 1961 under a syndication arrangement that gave them stakes in an entity called Empire State Building Associates which holds the deed to the building. That ownership structure has endured for more than 50 years, with many investors passing their holdings through family generations and continuing to receive annual returns on their investment.
Bloomberg quoted one stakeholder, Al Weiner, who runs an artisanal cheese business, as saying: “My grandma said don’t ever sell these. The checks come in like clockwork.”
Weiner and other investors have been canvassing opposition to the IPO plan, with Weiner saying: “I speak to people one on one, trying to educate them on the investment and the goodness that it’s been for the last 51 years, and the fact that this might not be the best deal for us at this point in time.”
With Malkin needing 80% approval from unit holders to press ahead with the IPO, the stage is set to see whether a 102-storey building can indeed float.
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