The Real Deal New York

Malkins revise plan for Empire State Building IPO

July 03, 2012 11:00AM

A letter filed with the Securities and Exchange Commission shows that the Malkin family has revised the structure of the initial public offering planned for the Empire State building, which the family controls, the Wall Street Journal reported.

The new proposed structure would give investors in the building, of whom there are approximately 2,800, the same favorable tax treatment as the Malkin family. 

The letter also highlights the fact that if the IPO does not go through, the complex ownership at the structure could spell trouble for the building. The estate of Leona Helmsley, the iconic tower’s other majority owner, will have to sell its interest according to the terms of her will, which would create a “stalemate,” the Malkins said. [WSJ]

  • concernedguest

    As a small investor in the Empire State Building, my concern is that I am getting half of what I am entitled to in this offering. The Malkins are taking twice what they are entitled to from the Empire State Building. They have an interest in half of the revenues/ profits of the Empire State Building for a finite period of time, which they are keeping. They are also getting half of the value of the offering, when they have almost no ownership interest in the entity that invested in the Empire State Building. From what I could see of the lawsuits, they were on behalf of multiple entities and do not raise this issue, which is likely unique to the Empire State Building.
    Is anyone else bothered by this?
    The Malkins should either be taking none of the equity and keep their interests in the revenues/profits of the Empire State Building. Alternately, they should give up their interest in future revenues/ profits of the Empire State Building and take part of the equity. Since their half interest in the revenues/ profits has an ending date, it is worth less than 50% of the value of the entity, say 40% to 45%, depending on a valuation.
    My understanding is that the original documents force investors to go along with the Malkins’ deal, no matter how unfavorable. I wonder if these provisions are enforceable.

  • bocaguru

    80% of the units (about 2,800 people own about 3, 000 units) need to approve the proposed consolidation and REIT IPO.
    Otherwise , no sale of the ESB can happen. and no IPO.
    The Malkins et al own about 10%, so they need would to give the partnership owners a fair deal. This is the 3rd offering–each one a little more favorable.
    Still you are right-still not equitable.

  • concernedguest

    If you vote against the deal as an investor, the original documents give the Malkins et al the right to buy you out for almost nothing. This may or may not be enforceable, but if it is the 80% approval requirement means nothing because anyone who disapproves can be bought out for nothing. Not clear if the deal even needs to get the 80% approval for this almost zero dollar buyout right to come into action.

    • bocaguru

      If 80% approve and you voted “against”, then the documents provide that you have 10 days to change your vote to “yes” and you will receive full benefits.