Malkin Empire State SEC filings
Empire State Building Associates L.L.C participants received a letter this week from Malkin Holdings. (dated 8/24/12)
The letter is a partial explanation why we, the owners of the Empire State Building, should give up 50%, half our
ownership, to the Helmsley majority owned sublessee. The sublessee has a contract to manage the building for us.
For reasons that are unclear, after fifty years of being described as the sublessee in every contract and SEC filings,
Malking Holdings has altered their language and now uses the term "the operating lessee."
In this letter they state:
"Once ESB’s value was determined, how was value allocated between ESBA and the operating lessee Empire State Building Company, and why?"
"While legally distinct from a joint venture, the structure has the economic attributes of a 50/50 joint venture (“JV”). The entities always functioned economically like a 50/50 JV, as described in Exhibit A"."
Let's take a look at:
1: "legally distinct from a joint venture"
2. "The entities always functioned economically like a 50/50 JV"
1."legally distinct from a joint venture"
Six months after filing for an IPO for Empire State Realty Trust, Inc, Malkin Holdings now states, for the first time, there is no legal joint venture between Empire State Building Associates LLC, the owner of the Empire State Building and their sublessee (operating lessee)
Here are two SEC filings that may have influenced this admission there is no joint venture between us, Empire State Building Associates, and the sublessee.
1961 "The receipt by Sublessor of overage rent shall not be deemed to create any partnership or joint venture between Sublessor and Subleasee."
Sublease between Empire State Building Associates As Sublessor and Empire State Building Company As Sublessee
http://sec.gov/Archives/edgar/data/32776/000119312512159041/d329525dex101.htm
page 4
2007 "Empire is not a member of Sublessee and its relationship with the Sublessee is through the contractual obligations set forth in the lease."
Correspondence from Wien & Malkin on behalf of Empire State Building Associates L.L.C. in response to letter from SEC.
http://sec.gov/Archives/edgar/data/32776/000003277607000016/filename1.htm
2. "The entities always functioned economically like a 50/50 JV"
Empire State Building Associates L.L.C. Sublessee
1961 Investment to purchase master lease $33,000,000 $0
1961 Loan to purchase master lease $6,000,000 $0
http://www.sec.gov/news/digest/1961/dig082461.pdf
2002 Mortgage to purchase fee title $60,000,000 $0
for land and building
(click here for mortgage)
2002 Mortgage risk Yes No
"Acquisition financing could expose Associates and
each Participant to certain risks of leverage, such as
loss of collateral, which do not presently exist while
the Leasehold is free of debt."
page 13
http://sec.gov/Archives/edgar/data/32776/000003277601500018/esbam14a.txt
Liability to restore property Yes No
"7. Associates will avoid present liability under the Master
Lease for property restoration costs which might exceed
insurance proceeds. If the Empire State Building were to
be destroyed in an attack similar to the recent terrorist
attack on the World Trade Center, or in some other disaster,
Associates could presently be obligated to reconstruct the
Building even if funds from insurance were not available
or adequate."
page 3
http://sec.gov/Archives/edgar/data/32776/000003277601500018/esbam14a.txt
The letter is a partial explanation why we, the owners of the Empire State Building, should give up 50%, half our
ownership, to the Helmsley majority owned sublessee. The sublessee has a contract to manage the building for us.
For reasons that are unclear, after fifty years of being described as the sublessee in every contract and SEC filings,
Malking Holdings has altered their language and now uses the term "the operating lessee."
In this letter they state:
"Once ESB’s value was determined, how was value allocated between ESBA and the operating lessee Empire State Building Company, and why?"
"While legally distinct from a joint venture, the structure has the economic attributes of a 50/50 joint venture (“JV”). The entities always functioned economically like a 50/50 JV, as described in Exhibit A"."
Let's take a look at:
1: "legally distinct from a joint venture"
2. "The entities always functioned economically like a 50/50 JV"
1."legally distinct from a joint venture"
Six months after filing for an IPO for Empire State Realty Trust, Inc, Malkin Holdings now states, for the first time, there is no legal joint venture between Empire State Building Associates LLC, the owner of the Empire State Building and their sublessee (operating lessee)
Here are two SEC filings that may have influenced this admission there is no joint venture between us, Empire State Building Associates, and the sublessee.
1961 "The receipt by Sublessor of overage rent shall not be deemed to create any partnership or joint venture between Sublessor and Subleasee."
Sublease between Empire State Building Associates As Sublessor and Empire State Building Company As Sublessee
http://sec.gov/Archives/edgar/data/32776/000119312512159041/d329525dex101.htm
page 4
2007 "Empire is not a member of Sublessee and its relationship with the Sublessee is through the contractual obligations set forth in the lease."
Correspondence from Wien & Malkin on behalf of Empire State Building Associates L.L.C. in response to letter from SEC.
http://sec.gov/Archives/edgar/data/32776/000003277607000016/filename1.htm
2. "The entities always functioned economically like a 50/50 JV"
Empire State Building Associates L.L.C. Sublessee
1961 Investment to purchase master lease $33,000,000 $0
1961 Loan to purchase master lease $6,000,000 $0
http://www.sec.gov/news/digest/1961/dig082461.pdf
2002 Mortgage to purchase fee title $60,000,000 $0
for land and building
(click here for mortgage)
2002 Mortgage risk Yes No
"Acquisition financing could expose Associates and
each Participant to certain risks of leverage, such as
loss of collateral, which do not presently exist while
the Leasehold is free of debt."
page 13
http://sec.gov/Archives/edgar/data/32776/000003277601500018/esbam14a.txt
Liability to restore property Yes No
"7. Associates will avoid present liability under the Master
Lease for property restoration costs which might exceed
insurance proceeds. If the Empire State Building were to
be destroyed in an attack similar to the recent terrorist
attack on the World Trade Center, or in some other disaster,
Associates could presently be obligated to reconstruct the
Building even if funds from insurance were not available
or adequate."
page 3
http://sec.gov/Archives/edgar/data/32776/000003277601500018/esbam14a.txt
