The Real Deal New York

Empire State Bldg investors decry IPO settlement

January 29, 2013 05:30PM

A consortium of investors in the Empire State Building sought Monday to intervene in a class action lawsuit over Malkin Holdings’ plans to take the building public, saying November’s settlement of $55 million is “grossly inadequate and unfairly apportioned,” Law360 reported.

The investors in Empire State Building Associates, who hold public securities that give them a stake in the building, said that they would be harmed by Malkin’s intent to offer a $1 billion initial public offering that seeks to turn the iconic skyscraper into a real estate investment trust. An explicit ban on the conversion, the investors said, had been a clause in the original investment agreement.

“The proposed settlement — just $55 million — amounts to barely 1 percent of the value of the roll-up, and is a tiny fraction of what the Malkin defendants are stealing from the ESBA investors,” the ESBA participants said in their memorandum opposing the motion for certification. “To add insult to injury, while the Helmsley estate — the majority owner of the operating lessee of the [Empire State Building] — is paying a portion of the settlement, it is unclear how much if anything the Malkin defendants are paying.”

In December, the U.S. Securities and Exchange Commission allowed Malkin to begin the process of converting the building into a REIT, which caused a rift among investors. Some felt that the change would force them to trade their low-risk securities that were akin to bonds for more volatile, high-risk equity securities. The investors have made a push in the court to be recognized as their own investor class. [Law360]Hiten Samtani