Malkins Will Go Ahead with REIT Plans

NEW YORK CITY-It's full steam ahead for a REIT IPO backed by the Empire State Building and other assets in Manhattan and the surrounding metro area. Malkin Holdings said in an SEC filing that it had rejected all offers to acquire the iconic office tower at 350 Fifth Ave., for which unsolicited bids were received ranging upward to $1.2 billion. The tower has been appraised at $2.53 billion, according to Bloomberg.

In a letter to shareholders in the syndicates that own the ESB as well as One Grand Central Place at 60 E. 42nd St., Malkin Holdings chairman Peter Malkin and president Anthony Malkin noted that they had received “indications of interest to purchase the fee and/or operating lease positions of the Empire State Building, as well as one indication of interest to purchase the fee and operating lease positions of One Grand Central Place.”

As fiduciaries, they wrote, “we review all matters concerning investment groups we serve” and therefore engaged Lazard Frères & Co. LLC as an independent financial advisor on the unsolicited bids.  “After our review, we have concluded that it is in your best interest to proceed with the consolidation and IPO as approved by a supermajority of the participants.”

Separately, on Friday an amended prospectus for Empire State Realty Trust was filed with the SEC. The prospectus does not provide details on pricing of the common shares that will be offered in the IPO, nor does it set a date for launching the offering.

Covered in the REIT will be 18 properties: seven Manhattan office assets totaling 5.9 million square feet; five suburban office assets that comprise another 1.8 million square feet; and six standalone retail properties, including four in Manhattan. The REIT also would have an option to buy two more Manhattan assets that would add another 1.5 million square feet of office.

First and foremost among these assets, though, is the Midtown icon scaled by King Kong in two movies made 72 years apart. “The Empire State Building is our flagship property and provides us with a significant and diversified source of revenue through its office and retail leases, observatory operations and broadcasting licenses and related leased space,” according to the prospectus.

The prospectus notes that renovation and repositioning efforts under way at the ESB, as well as other office assets in the W&H Properties portfolio, “have enabled us to lease significant amounts of space at the Empire State Building to new higher credit-quality tenants, including: LF USA; Skanska; Coty Inc.; the Federal Deposit Insurance Corp.; Funaro & Co.; Kaltex North America Inc.; LinkedIn; Noven Pharmaceuticals; People's Daily Online USA; Shutterstock; Taylor Global; the Freeh Group; Turkish Airlines; and World Monuments Fund. We believe completing the repositioning program for the Empire State Building, as well as our other Manhattan office properties, represents a significant growth opportunity for our company.”