Empire State Building Managers Sued Again by IPO FoesChris Dolmetsch and David Levitt
The Empire State Building’s managers were sued for the second time in two weeks over their decision to take the iconic New York skyscraper public last year.
Hope Ratner and Mary Jane Fales, two of about 2,800 longtime investors in the 103-story tower, filed the lawsuit today in New York State Supreme Court in Manhattan. The plaintiffs, who seek class-action status for their complaint, accuse the managers, Peter Malkin and his son Anthony, of rejecting higher offers for the building, including one for about $500 million more than investors received for their interests.
Empire State Realty Trust Inc., whose properties include the building, sold 71.5 million shares for $13 each on Oct. 1. The sale culminated an almost two-year quest by the Malkins to take the skyscraper and 20 other New York-area properties public, a process marked by battles with longtime investors.
The Malkins “refused to meet with any of the bidders and, to the best of plaintiffs’ knowledge, never had one substantive word of dialog with any of them,” Ratner and Fales said in their filing, which also names Empire State Realty Trust as a defendant.
“These claims are wholly without merit and we will respond to them in court,” Hugh Burns, a spokesman for Empire State Realty Trust at Sard Verbinnen & Co., said in an e-mail.
Of about 2,800 Empire State Building legacy unit holders, a minority challenged the real estate investment trust proposal, preferring to keep a steady income stream and the bragging rights that come with owning a piece of a landmark.
Empire State Realty Trust rose 1 percent to $15 in trading today in New York.
A separate group of investors sued the Malkins last month over claims they deprived thousands of early investors of as much as $410 million in profit when they took the tower public.
Anthony Malkin is chairman and chief executive officer of the new publicly traded company, which owns six other office properties in Midtown Manhattan, including the 55-story One Grand Central Place. Peter Malkin is chairman emeritus.
New York State Supreme Court Justice O. Peter Sherwood in Manhattan in May approved a $55 million settlement of lawsuits over the plan to take the building public, after rejecting a request to intervene in the case by investors opposed to the settlement.
Sherwood in February denied a motion by Ratner, Fales and four other investors to intervene in the case, while allowing them to argue their claim that a provision allowing the buyout of investors who voted against the proposal for $100 was illegal. Sherwood later declared the buyout provision legal, a ruling that the dissenters have appealed.
Peter Malkin told an unnamed investor in a voice-mail message after the settlement was approved that the person’s shares would be worth “over $1 million,” as the company was seeking the final votes to proceed with the IPO. The shares were worth less than $700,000 on the first day of trading and remain restricted from being sold under the rules governing the offering, according to the complaint.
In November 2011, one day after the Malkins disclosed their intent to make the Empire State Building part of a REIT, they unilaterally amended its governing documents to add a “poison pill” provision, blocking anyone from acquiring more than 6 percent of its shares, according to the complaint.
“There was no other purpose for the poison pill amendment other than to prevent potentially superior tender offers” for the building’s unit holders, the plaintiffs said in the latest suit.
The 1,453-foot (443-meter) skyscraper was the tallest building in the world until New York’s World Trade Center was built in the 1970s. Its 86th- and 102nd-floor observatories attract about 4 million visitors a year, according to its website.
The case is Ratner v. Malkin, 650029/2014, New York State Supreme Court, New York County (Manhattan).