Mackenzie Capital offers to buy Empire State Building units

NEW YORK Mon Dec 17, 2012 3:29pm EST

NEW YORK Dec 17 (Reuters) - MacKenzie Capital Management LLC is offering to buy up to 170 ownership units in Empire State Building Associates LLC, which owns the iconic New York skyscraper, for $110,000 a unit, and said it would support a plan to fold the building into a proposed real estate investment trust (REIT), according to regulatory documents filed on Monday.

MacKenzie's offer comes at a time when Malkin Holdings LLC is trying to persuade investors in Empire State Building Associates to back its plan to make the Empire State Building the centerpiece in a publicly traded REIT. The proposed REIT, to be called Empire State Realty Trust Inc, would contain more than 18 other properties, with most located in Manhattan.

MacKenzie specializes in buying illiquid real estate-backed securities, such as non-traded REIT shares, limited partnership units and private real estate notes. The funds will make money if the proposed REIT becomes public and the units increase in value.

The REIT proposal has divided the Empire State investors, some of whom believe Malkin is getting too much from the split of the ownership at their expense. Others support the plan as a way to cash out of a long-term investment they've inherited from their parents and grandparents.

The proposal is expected to be put to a vote after the SEC signs off on the documents.

The 170 units in Empire State Building Associates would amount to 5.15 percent of the 3,300 units that originally were sold for $10,000 around 1961 to small investors, according to the filing with the U.S. Securities and Exchange Commission. MacKenzie, based in Moraga, California, is offering to buy the units on behalf of funds it manages.

As of Dec 31, 2011, there were 2,824 holders of units in Empire State Building Associates, according to SEC filings. The REIT plan requires the approval of holders of at least 80 percent of each of the three groups of 1,100 units.

The 170 units would cost the MacKenzie funds a total of $18.7 million. At $110,000 per unit, the offer is more than twice the highest paid price for a unit sold in 2011, according to SEC documents filed by the sponsor of the REIT, Malkin Holdings.

Malkin Holdings has estimated, for the purposes of the IPO, that each unit is valued at about $323,803. However, actual value would be based on the stock market price. A representative of Malkin Holdings declined to comment.

The offer expires Jan. 25, 2013, but may be extended, according to SEC documents.

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