Last updated: May 29, 2013 7:38 pm

Empire State Building gets Reit and IPO go ahead

The group that controls the Empire State Building has secured the shareholder votes that it needs to go ahead with a $1bn public stock offering.

After more than a year of bitter wrangling between Malkin Holdings, which controls the New York skyscraper, and a cluster of dissident investors, more than 80 per cent of building’s 3,300 ownership units have finally approved a plan to create a real estate investment trust, according to a regulatory filing on Wednesday.

The Empire State Realty Trust, to be traded on the New York Stock Exchange, aims to bring together the landmark tower and other New York-area properties in its portfolio. The estimated value of the Reit is about $4.2bn.

The offering, which would be the second largest by a US real estate investment trust, according to data provider Dealogic, would probably be executed within two months following the approvals, people with knowledge of the matter have said.

Under the terms of the Malkin proposal, investors who failed to consent within 10 days of an 80 per cent majority vote approving the transaction would be bought out at a nominal value of $100 for every $10,000 per share originally invested. Each share was valued at $323,803, according to the prospectus.

“The vote remains open and we urge all investors who have not yet voted in favour of the proposed consolidation and IPO to do so immediately,” said Brandy Bergman, spokesperson for Malkin.

Malkin has argued that the proposal would give investors liquidity and greater growth opportunities. However, its opponents, who are also reluctant to give up the sentimental value of owning a part of the Manhattan landmark, have argued that the Reit might result in a loss of income for stakeholders.

The proposed portfolio for the listed trust includes 12 office properties and six retail properties, of which the 102-floor Empire State Building is the largest revenue earner.

Marty Flaxman, who voted against the proposal originally, said that he would now change his vote. “The way this system works, they have you over a barrel,” he said. “I don’t think anybody is not going to agree at this point, especially if you’re someone like myself where a good percentage of your net worth is made up of these shares. Nobody is going to risk losing their shares.”

Last month a New York judge ruled against six opponents who had argued that the proposed buyout of those investors who failed to consent to the transaction was illegal.

The Malkin family took over day-to-day management of the midtown Manhattan skyscraper – at one time the world’s tallest building – in 2002, and gained control in 2010. The formation of the Reit would end an archaic ownership structure that has spawned numerous legal battles throughout the building’s history.

The largest offering to date by a US Reit was Douglas Emmett, owner and operator of office properties and apartment blocks, which raised $1.59bn in October 2006.

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