The Empire State Building is expected to be sold through an initial public offering. Malkin Holdings LLC, the private company which currently owns the New York City icon, initially announced that it wanted to do this in November 2011. The firm filed the papers to do it in February of last year.
The REIT Plan For Empire State Realty
The plan puts the historic office tower into a new real estate investment trust (REIT) that will be known as Empire State Realty Trust Inc. Along with the iconic structure, 17 other buildings in Manhattan will also be put into the REIT, according to regulatory filings.
Reuters’ Ilaina Jonas reports that shareholders of the private Malkin Holdings officially approved it today, although there had been opposition. Some of the firm’s investors had taken issue with the way their stake was valued under the plan. They sued but lost, and the case is now in appeal.
Today’s regulatory filing indicates that investors who make up at least 80 percent of the ownership units of the private firm voted for the plan. The REIT estimates that it will be able to raise $1 billion through the IPO. A date for the IPO has not yet been set.
The Value Of The Empire State Building
Currently the Empire State Building is being renovated. Although it’s been decades since the building was the tallest in the world, it still is one of the major landmarks on the New York City skyline. As of September 30, it was almost 70 percent leased.
The SEC filing indicates that 3,300 units were sold to investors back in the 1960s for $10,000 each. Today those units could be worth over $320,000 each. At the end of last year2,824 investors owned the units.
Alone, the Empire State Building was worth $2.33 billion after debt. The REIT however, which includes those 17 other buildings, is estimated to be worth approximately $4.15 billion after debt.
Office Building Values On The Rise
According to Jonas, the values of office buildings in the biggest cities across the U.S. have been rising, making up some of the value that was lost in the wake of the financial crisis. The Green Street Commercial Property Price Index showed that office building prices were 1 percentage point higher than their highest points in 2007 as of May 6.
If the planned REIT goes through, it will be part of a major trend that’s been developing recently. Companies in virtually every industries are forming REITs to take advantage of the tax structure.