Malkin Takes Manhattan: After Snag, IPO Vote Next Month Expected to Succeed
By Al Barbarino March 26, 2013 8:00 am
reprints“Apparently realizing that they are likely to lose the current ongoing vote, they seek to confuse the investors, delay the process and thwart an obviously beneficial settlement,” it stated.
All told, the unit-holders in Empire State Building Associates boast 3,300 shares worth $323,803 or $358,670 each, a prospectus outlining the initial IPO shows. The Malkins, in the letter to investors, asked unit-holders to vote to approve the REIT by March 25 (extended to April 8 on Friday).
“If they get approval on the 25th, my guess is that they will get it out as quickly as they can, during the second quarter or maybe early in the third,” said Tim Pire, a managing director and lead portfolio manager for real estate investment management firm Heitman.
If it goes through, the $1 billion IPO, while substantial, pales in comparison to the REITs that usually come to mind when talking New York City real estate: Simon Properties has a market capitalization of $49 billion; Boston Properties (BXP), $15 billion; Vornado Realty Trust (VNO), $15 billion; and New York-based SL Green (SLG), over $7 billion.
It’s large enough, however, especially given its growth potential, that big investors, including Heitman, will take a close look, Mr. Pire said.
“Right out of the box, as a New York-centric REIT, everyone will make the comparison to SL Green and even Vornado,” said Mr. Pire. But, he added, “They have a longer track record, with seasoned management and larger market caps … like any IPO, the management will have to prove itself in the public market.”
Though the REIT market was hit hard by the so-called great recession, along with the commercial real estate industry at large, it bounced back stronger than the general economy and outpaced the S&P 500 and the other major indexes, as it had in the past.
Total returns on REITs went from negative 28 percent in 2008 to positive 28 percent in 2010. By 2012, costly modifications made in the previous two years bolstered investor confidence and boosted buying power for 2012.
Since 2009, shares of Boston Properties are up almost 100 percent; Brookfield (BN) Office Properties, up 126 percent; SL Green, a whopping 200 percent.
“They were a near-death experience during March of 2009,” Mr. Longua said. “It was very expensive to do, but they recapped and returned, outperforming the major indexes.”
The rapid recovery of the REITs proved their effectiveness then. Now, the Malkins keep faith that their own REIT will find its way during these challenging times.
“This is not something which we undertook lightheartedly,” Mr. Malkin said. “We gave it a lot of thought and we are continuing on.”
