Empire State Realty IPO Priced At $13 Per Share

Empire State Realty Trust Inc (NYSE:ESRT) sold its 71.5 million shares at the lower end of its expected range of $13 to $15 per share.

Empire State Realty IPO Priced At $13 Per Share

The IPO caps two years of rancor among the marquee building’s private owners.

Details of the offering

Last month, the real estate investment trust filed to raise at least $1.07 billion on the NYSE Euronext. According to its filing, the company would offer 71.5 million shares for $13 to $15 each. Apart from the marquee Empire State Building, Empire State Realty Trust Inc (NYSE:ESRT) 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.

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.

Empire State Realty second biggest IPO

Empire State Realty Trust Inc (NYSE:ESRT)’s IPO was the second-biggest for a U.S. REIT, excluding an over-allotment. Earlier in 2006, Douglas Emmett Inc. raised almost $1.4 billion, according to data compiled by Bloomberg.

Slow recovery in office market

According to real-estate research firm Reis Inc (NASDAQ:REIS), the office-vacancy rate in the third quarter nudged down to 16.9 percent from 17 percent three months ago. During the last quarter, the rents sought by landlords were up just 0.3 percent, reflecting the standard fare experienced by the office sector during the past three years.

Despite being a tourist magnet, investors faced challenges in valuing the cash flow from the Empire State Building’s observatory, as they are not sure how much they should pay for potential leasing gains among the office buildings.

Despite lukewarm reception received by the Empire State Realty IPO, Michael Knott, an analyst at real estate research and trading firm Green Street Advisors feel the lukewarm response may not affect other real estate companies planning their IPOs as its situation is quite unusual.

About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports