Months of wrangling with dissenting investors finally earned Malkin Holdings the number of votes necessary to launch a REIT that would include the Empire State Building as an asset, but now the company says it is reviewing multiple offers that could lead to its sale.
The latest offer comes from one of the city’s largest landlords, Thor Equities, which offered more than $2.1 billion in cash to buy the storied asset. Peter and Anthony Malkin are apparently considering it, even though it would likely nullify their tireless pursuit to create the REIT.
“We received last week two unsolicited bids to purchase the Empire State Building,” stated a letter sent by the Malkins to shareholders and filed with the U.S. Securities and Exchange Commission late last month. “We are reviewing the offers and their terms. We consider all matters, including unsolicited offers, consistent with our fiduciary duties, to form a judgment on what action is appropriate.”
The first surprise offer came last month after Attorney Stephen Meister sent a letter to the Malkins’ attorney on behalf of Cammeby’s International Principal Rubin Schron, offering $2 billion to buy the 102-story tower and ultimately offer current stakeholders the ability to retain part-ownership.
Next, Thor Equities, which owns and develops urban real estate throughout the United States, Latin America and Europe, controlled by real estate scion Joe Sitt, upped the ante with its $2.1 billion offer.
Finally, a third offer, also for $2.1 billion, was reportedly made by a group of investors with reported ties to Princeton Holdings and Philips International. All offers were made within a two-week window.
While appraisals assess the building’s value at more than $2.3 billion (more than $2.5 billion including its mortgage), Mr. Meister justified Mr. Schron’s offer in the letter by stating that in the event of a REIT there is “no guarantee of the price at which Empire State Realty Trust, Inc. securities will trade once the lock-out period expires,” suggesting that a sale of the building is a safer bet for the Malkins.
Any sale of the building, however, requires an agreement between not only Peter and Anthony Malkin, who fought long and hard to achieve voter approval to launch the REIT, but also the Helmsley family, which retains a 64 percent stake in the tower’s sublease.
Late last month the Malkins announced that they had achieved more than the number of votes necessary to proceed with the launch of the REIT’s IPO, following the New York court system’s repeated blows earlier in the month against Mr. Meister and a group of dissenting shareholders.
On May 2, Justice O. Peter Sherwood said he would approve a $55 million class-action settlement between the Malkins and a separate group of investors tied to the building. That ruling came just days after he ruled in favor of the Malkins’ plan to buy out investors who opposed the IPO for $100 a share.
Their plan would place the Empire State Building and more than 17 other properties into a REIT called Empire State Realty Trust Inc, to be traded under the symbol “ESB” on the New York Stock Exchange.
Critics have argued that the REIT 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.
Thor Equities deferred calls to a public relations agency that did not return calls in time for publication. A spokesperson for the Malkins declined comment. Princeton Holdings and Philips International did not return calls seeking comment in time for publication.
Update, 7/2/13: The New York Post reports that yet another offer on the Empire State Building was made.
“San Francisco-based Reuven Kahane, who grew up in its shadow and once worked in the building, has joined with Eastern European money to offer $2.25 billion for the ESB — topping three other offers for a property its current owners want to place into an IPO and not sell,” the paper reported.