On Monday, the owners of the iconic Empire State Building filed papers to go public. The company, owned by the Malkin family, had initially discussed their IPO plans in November and now the are moving forward with this goal.
So why go public? The Malkin family believes this will simplify things with their expansive real estate holdings. The offering could raise up to $1 billion and enable them to change investors’ equity into stock in their Empire State Realty Trust company, according to USA Today.
In the filing’s paperwork, the company said it will create two stock classes: Class A shares sold to the public with Class B stock holding 50 votes a share. The stock is expected to list on the New York Stock Exchange with the ticker symbol ESB.
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Anthony E. Malkin will lead the company as chairman and chief executive. He purchased the building with his father in 2002 and since then, has renovated it. They have spent millions of dollars doing so and they’re not quite done yet.
In 2009, they launched a $550 million renovation to make the building energy efficient and environmentally friendly. An additional $55 million to $65 million will be needed to compete upgrades in the next year or so. The company listed in its recent prospectus that it will expand its energy-efficiency goals to its portfolio of buildings.
Empire State Realty has a number of partnerships to help them achieve this including the Clinton Climate Initiative, Jones Lang LaSalle and others.
Appeal to Investors
From the offering, shareholders will own portions of the company’s 12 office buildings in New York and Connecticut. Combined, this is 7.7 million square feet of office space for rent, according to the New York Times.
In the company’s portfolio, the granddaddy is the Empire State Building. The 102-story skyscraper, listed as New York’s tallest building, saw $156.7 million in revenues ending Sept. 30 (for nine months). In 2011’s first nine months, Empire State Realty earned net income of $71 million (pro forma) on $382.2 million of revenues.
But aside from the allure of the Empire State Building’s history (see movies An Affair to Remember and King Kong), what will draw investors to this stock?
According to John Fitzgibbon, founder of IPOScoop.com, which tracks IPOs, he believes that investors won’t get a good idea of the IPO’s value until the company includes more offering information. He added that IPOs by real estate investment trusts really don’t have a lot of fanfare.
Fitzgibbon said, “REITs seem fairly valued when they’re priced. You don’t see any moon shots in the crowd. I wouldn’t expect it to behave as people were talking about Facebook.”