After taking a night to sleep on it, Supreme Court Justice O. Peter Sherwood paved the way yesterday for Peter and Anthony Malkin to launch a $1 billion IPO that would include the Empire State Building as an asset, ruling that the Malkins’ share buyout plan is legal.
The plaintiffs in Meyers v. Empire State Realty Trust Inc. had asked Justice Sherwood on Monday at the New York State Supreme Court in Manhattan to block the Malkins’ plan to buy them out for $100 a share if they voted against the IPO.
The ruling is a breakthrough for the Malkins, as it could turn those votes in favor of the IPO. As of April 3, the Malkins had received 94 percent of the total votes needed to proceed with the IPO.
If the “supreme” boost indeed allows the Malkins to accumulate the necessary votes after the ruling, the Empire State Building will join 19 other properties in the new REIT known as Empire State Realty Trust Inc.
“We are pleased by the court’s ruling and are proceeding with our solicitation with the intention of closing as soon as we reach the approval threshold,” a Malkin Holdings spokesperson said in an email sent to The Commercial Observer. “The fact is that far more investors support this transaction than oppose it. We are focused on delivering the majority what they want as quickly as possible.”
Critics have argued that the IPO robs investors of a predictable income stream from the building’s rents, though the Malkins have countered that it would offer greater growth, liquidity and diversification opportunities.
Stephen Meister, the attorney representing the opposition, was unavailable for comment via telephone and did not immediately respond to emails seeking comment. Anthony Malkin could not be immediately reached for comment.
Despite yesterday’s decision, on May 2 Justice O. Sherwood will hear arguments regarding a $55 million class-action lawsuit against the Malkins that, among other things, claims the IPO is illegal because it does not constitute a “capital transaction,” as the Malkins have argued to justify its legality.