In what could amount to the second biggest IPO for a real estate investment trust, Empire State Realty Trust Inc. (ESB), whose properties include Manhattan’s Empire State Building, recently filed to raise at least $1.07 billion on the NYSE Euronext (NYSE:NYX).
Empire State Realty Trust share offering
It’s expected, according to the filing, that the company will offer 71.5 million shares for $13 to $15 each. In addition to the Empire State Building, Empire State holds an additional 20 buildings in the New York area. Malkin Holdings LLC, who supervises the Empire State Building, following battles with dissident investors and a spate of unsolicited bids for the tower, reached the decision to go public after years of debate.
“It would offer public investors a unique way to play the New York market,” said Michael Knott, an analyst with research firm Green Street Advisors Inc. He also noted that in addition to the ESB’s observatory as a revenue stream, the company also has a concentration of properties in the Times Square South neighborhood that experts consider “up-and-coming.”
The IPO is scheduled to price Oct. 1, according to data compiled by Bloomberg, led by Goldman Sachs Group Inc (NYSE:GS) and Bank of America Corp (NYSE:BAC).
Malkin Holdings challenges
Malkin Holdings faced challenges from nearly 3,000 investors when it filed for a share sale 20 months ago. The fight got ugly with both sides accusing the other of misrepresentation. In May, Malkins finally received approval to roll the tower into the REIT. More recently, Thor Equities LLC offered $1.4 billion for the iconic 102-story building, $220 million more than the building is valued by Empire State Building Associates LLC.
The Malkins are now thought to be set on the idea of an IPO and wont be entertaining other offers, believing that it is in the best interest of investors. In addition to the bid by Thor Equities LLC, the Malkins received one from investor Rubin Schron and a joint bid by Philip Pilevsky and Joseph Tabak.
Philip Pilevsky on IPO
“They seem to want to do their IPO, and they don’t care what the bid is,” said Philip Pilevsky in an interview Sept. 18. “We dropped the effort. If they would do it, we’d do it in a minute.”
Observatory visits by tourists accounted for $92.2 million in revenue last year while the office portion of the tower was 78 percent leased as of June 30, according to the REIT prospectus. That’s up from 67 percent as of the end of last September.
“The 20 or so floors they have finished renovations on, they’ve increased the revenues on by almost 110 percent,” Knott said. “The early results there are encouraging, and speak to the progress they have made in executing the repositioning.”