By CRAIG KARMIN
As if stock-market volatility, arcane securities regulation, and the tepid state of the office market weren't enough, the real-estate family seeking to list the Empire State Building now has to contend with an unexpected foe: a semiretired guy in a beach community near San Diego.
Richie Edelman inherited a small stake in the iconic skyscraper that his grandparents purchased in 1962 from the storied real-estate team of Harry Helmsley and Lawrence Wien. Now he is leading a group of two dozen investors who are opposed to the structure of the proposed public offering and are trying to block or alter the deal, which is being led by the Malkin family.
The Empire State Building is the jewel in a proposed new real-estate company, to be known as Empire State Realty Trust, that will include 17 other Malkin properties and is expected to raise up to $1 billion from an initial public offering within the next year.
Mr. Edelman and other critics of the IPO say it favors the Malkins at the expense of the other part-owners of the tower. If the offering goes through, the Malkin family and the estate of Leona Helmsley would own stakes valued at $642 million and $1 billion, respectively.
"The investors who own the Empire State Building are not getting a fair shake, and everyone knows it," says Mr. Edelman, whose stake would be worth about $3.3 million under the terms of the sale.
Sam Hodgson for The Wall Street JournalRichie Edelman
A spokeswoman for the Malkins declined to comment.
While a vote still is months away, the family needs 80% of shares held by the Empire State Building's 2,800 owners to approve the plan, which is why it is hard to swat Mr. Edelman away like a bothersome but harmless gadfly.
To be sure, Mr. Edelman's group isn't big enough to block the deal by itself. Some investors haven't been persuaded and are leaning toward supporting the Malkins.
Nevertheless, the group has had some success in wringing concessions from the Malkins, who agreed recently to change the offering's tax treatment of the investors. That has made Mr. Edelman an unlikely player in one of the most hotly-anticipated real-estate IPOs in years.
A 57-year-old college dropout who bounced around from job to job before getting into the music-video business, Mr. Edelman may seem ill-equipped to take on a New York real-estate dynasty.
The Malkins control millions of square feet of office space in the New York region. Peter Malkin, the patriarch of the family and chairman of Malkin Holdings, was the son-in-law of Mr. Wien, Mr. Helmsley's partner. His son, Anthony Malkin, currently runs the family company and recently oversaw a $550 million upgrade of the Empire State Building that is attracting larger and high-paying tenants.
Mr. Edelman's organization argues that the smaller investors should do better, based in part on the value of Manhattan office properties. The group consists of about two dozen volunteers, many of them retirees.
The volunteers make phone calls to persuade other investors that there are alternatives to an IPO, such as a sale to a private buyer, or at least better terms to be had. Richie Edelman says most of the hundreds of investors his group has contacted share at least some of his concerns.
Not every investor is convinced. "I thought they had some good points but also some outrageous claims," says Howard Peskoe, a New York-based attorney and investor in the building who listened in on one of the group's conference calls last month.
Mr. Peskoe said the investors didn't have a plan for allowing owners to sell their shares in the event the IPO didn't happen, and says he is planning to vote in favor of the proposed sale.
Not long ago, the Malkins were dismissing Mr. Edelman and his cohorts as a tiny minority of investors, according to investors who spoke with Peter Malkin. But two weeks ago, the Malkins announced for the second time in three months they were changing terms of the IPO offering in a way that responds to complaints from small owners.
For instance, the new proposal will allow investors to receive stakes in the new public company as tax-deferred partnership units, instead of common shares, giving investors the same favorable tax treatment that the Malkins already enjoyed.
A Long Island, N.Y., native, Mr. Edelman attended college in Albany, New York City, Denmark, and San Diego before deciding after four and half years that formal education wasn't for him.
In 1982, he moved to Los Angeles to help produce a television series in which Arianna Stassinopoulos—now Arianna Huffington, founder of the Huffington Post website—interviewed politicians, scientists and artists. He now lives in Solana Beach, Calif., and works part-time advising companies on their online media strategies.
Late last year, he started reading preliminary Security and Exchange Commission filings for the IPO and decided investors could use a guide. He set up a website that warns investors how they might fare under the proposed public sale.
The site raised questions about the Malkins' compensation, tax treatment for the existing owners, and the valuation process for the buildings.
Michael Caplan, a 68-year old who lives in Boca Raton, Fla., said he is sending the group a $1,000 check to help cover legal fees and other expenses. He thinks the Malkins' fees and other compensation is too high but doesn't think the message is getting through to his fellow investors.
"I don't want to read that the little guy didn't know what he was getting into" after an IPO, he said.
Write to Craig Karmin at email@example.com