Suits from Empire State investors still plaguing Malkins

Family that owned NYC landmark sued again, this time for $600M

TRD New York /
Feb.February 13, 2014 06:04 PM

Another day, another lawsuit against the Malkin family, the former majority owners of the Empire State Building who placed the iconic building in a publicly traded REIT last year.

This suit, filed by former investors last week in New York State Supreme Court, claims that they lost $600 million when the Malkins allegedly breached their fiduciary duty.

The lawsuit follows a $500 million claim lodged by investors last month — and a slew of other suits that preceded the initial public offering for the landmark building in October 2013. What sets this suit apart, said John Rizio-Hamilton of Bernstein Litowitz Berger & Grossmann LLP, which represents some of the plaintiffs, is that it consolidates the different claims from six different investors. The group invested in now-defunct Empire State Building Associates, the entity that, along with the Malian family, the estate of Leona Helmsley and approximately 2,800 individuals, owned the Empire State Building before the IPO.

It also names Malkin Holdings and the Malkin Family as defendants, but not Empire State Realty Trust, the real estate investment trust that resulted from the IPO.

The building and about 18 others eventually transferred their holdings over to the ESRT Trust for $1.89 billion in October.

Rizio-Hamilton said that the attorneys decided not to pursue action against the REIT in the consolidated claim because “it is the Malkins themselves who owed fiduciary duty to their investors.” However, a source familiar with the matter said that since ESRT acquired Malkin Holdings in the transaction, and so it is still, in effect, the party that has been sued.

The suit, like the one filed last month, claims that the Malkins ignored several legitimate offers for the 103-story building at 350 Fifth Avenue. That includes bids from billionaire Ruby Schron in June 2013 for $2 billion, which The Real Deal first reported, and from Thor Equities in September 2013 for $1.4 billion. Either offer – for the iconic tower alone, not the 18 that were packaged together in the IPO – would have meant a better payout for investors, the suit alleges.

The representative for the ESRT said only “these claims are wholly without merit and we will respond to them in court.”

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