The Real Deal New York

Qatari fund pays $622M for stake in Empire State Realty Trust

Qatar Investment Authority will own 9.9% of REIT

August 24, 2016 09:34AM
By E.B. Solomont

From left: Sheikh Abdullah bin Mohammed bin Saud Al Thani, Tony Malkin and the Empire State Building

From left: Sheikh Abdullah bin Mohammed bin Saud Al Thani, Tony Malkin and the Empire State Building

Qatar’s sovereign wealth fund has acquired a stake in New York City’s Empire State Building through a $622 million deal for a minority stake in publicly-traded Empire State Realty Trust.

An affiliate of the Qatar Investment Authority will now own 9.9 percent of the real estate investment trust, the REIT said Wednesday. Under terms of the deal, QIA purchased 26.6 million shares of newly-issued Class A common stock, priced at $21 per share, the REIT said. According to Yahoo Finance, the REIT’s market cap is now $2.56 billion.

ESRT Chairman and CEO Tony Malkin called the relationship with QIA a “great fit” for the REIT, while other ESTR executives said the infusion of new capital would allow the company to execute on its long-term growth strategy and bolster its returns to shareholders.

“From inception, we have made clear that we are committed to the long term for our capital structure and flexibility for the future,” said CFO David Karp.

In addition to the iconic Empire State Building, ESRT — which went public in 2013 — has a portfolio of 10.1 million square feet, including 250 West 57th Street and retail assets like 112 West 34th Street. The Empire State Building, however, accounts for roughly 20 percent of the REIT’s revenue.

For the Qatari fund, the $622 million deal is part of its aggressive plan to deploy $35 billion in the U.S. real estate market over the next five years. The fund, which opened an office in New York in September, also owns a 44 percent stake in Brookfield Property Partners’ $8.6 billion Manhattan West development.

This spring, QIA was in advanced negotiations to buy the St. Regis hotels in New York and San Francisco from Starwood Hotels & Resorts for a reported $1 billion.