Empire State Building IPO Vote Can Proceed, SEC Says
(Corrects story published Dec. 26 to remove reference to dissident investor in ninth paragraph.)
The company that controls the Empire State Building can go ahead with a vote to allow the iconic New York skyscraper to be included in a proposed real estate investment trust.
The U.S. Securities and Exchange Commission issued a “notice of effectiveness” today for the plan to ask about 2,800 co-investors in the tower to approve the conversion of their interests into units of Empire State Realty Trust Inc. (ESB), a REIT proposed by Peter Malkin and his son Anthony. Empire State Realty filed in February to raise as much as $1 billion in an initial public offering.
The determination means the SEC believes the offering document contains enough information for the investors to make an informed decision, said Thomas Voekler, an attorney at Richmond, Virginia-based Kaplan Voekler Cunningham & Frank Plc who specializes in real estate public offerings. A group of investors whose parents and grandparents bought shares in the tower in the early 1960s have challenged the Malkins, saying the offering shortchanges them.
While today’s filing says nothing about the merits of the proposed offering, “it’s a very important step,” Voekler said in a telephone interview. After months of amendments, “the disclosure document is set where it’s going to be set.”
The Malkins want to consolidate the tower and 18 other properties they control in Manhattan and Westchester County in New York and Fairfield County, Connecticut, into a publicly traded company. Malkin Holdings LLC confirmed that the SEC declared the offering statement, known as an S-4, effective.
The company “will commence its solicitation of investors in due course,” Hugh Burns, a spokesman, said in an e-mail.
Empire State Realty hasn’t specified the number of shares it plans to sell or the price range. The $1 billion is a placeholder amount used to calculate fees and may change when the terms are set.
The Malkins need 80 percent approval from the 3,300 units held by the co-investors to include the skyscraper in the IPO. Unitholders of companies that control 1 Grand Central Place, formerly known as the Lincoln Building, and the Fisk Building at 250 West 57th St. also must approve the plan.
Richard Edelman, a beneficiary who lives in California and runs a website critical of the offering, has said the proposal would deprive unitholders of a reliable income stream that is poised to jump in value as renovations of the Empire State Building are completed. The Malkins have challenged him and other dissidents, saying the planned REIT would reward investors with liquidity and greater growth opportunities.
“You have people who have held onto certificates that have been in their family for a long time,” Voekler said. “This tugs at the heartstrings.”
A separate set of investors agreed in September to settle a class-action lawsuit challenging the proposed offering.
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