UPDATE 1-Thor Equities raises offer for Empire State Building

Mon Sep 9, 2013 8:08pm EDT

By Ilaina Jonas

NEW YORK, Sept 9 (Reuters) - Thor Equities LLC, one of New York City's biggest landlords, on Monday raised its offer to buy the Empire State Building, hoping to trump a plan to roll the landmark property into a trust, according to sources familiar with the matter.

Thor has offered to buy Empire State Building Associates LLC, which owns the land, the building and the master lease on the historic tower, for $1.4 billion in cash, significantly higher than the $1.18 billion the limited liability company is estimated to be worth should it become part of a publicly traded real estate investment trust (REIT). Thor's previous offer was $1.25 billion, according to a source.

The latest offer comes on the heels of the rejection of several offers. But it is significantly bigger than the previous ones and could pose difficulties for Malkin Holdings LLC which not only spearheaded the plan for the publicly traded real estate investment trust, but also is the sponsor leading investors in the building.

The offer is the latest salvo in a complicated, long-running battle for control of the building involving dissident investors and some of New York's biggest real estate owners.

The sale would be an alternative to the REIT, which already has the approval of nearly all the investors in the building, which was the world's tallest from its completion in 1931 until 1972. More than 80 percent of the investors would have to approve any sale.

The building has been appraised at $2.53 billion and has an exchange value, or value in an IPO, of $2.35 billion. About $1.16 billion of that is allocated to Empire State Building Co LLC, which has the sublease on the building that effectively gives it control of the property until 2076, according to documents filed with the Securities and Exchange Commission.

The Helmsley Trust, which wants to sell its stake, owns a 63.8 percent interest in Empire State Building Co LLC.

About 2,800 investors hold the 3,300 units in Empire State Building Associates. As supervisor of the investors in Empire State Building Associates, Malkin Holdings has a fiduciary responsibility to consider other offers for the property and act in their best interest. Thor's offer would allow the investors to remain owners, if they choose.

Last week, Malkin Holdings notified investors that after having engaged Lazard Frères & Co. LLC as an independent financial adviser, it would stay the course with the IPO of the REIT. It gave no further explanation of the decision and a representative declined additional comment. Those offers were generally in line with the appraised and exchange values.

A representatives for Thor could not be reached for immediate comment and a spokesman for Malkin Holdings declined to comment on the offer.

Jason Meister of Avison Young is representing Thor.

Anthony Malkin is president of Malkin Holdings. His father Peter is chairman. The family has a 15.43 percent stake in Empire State Building Associates and a 6.7 percent stake in Empire State Building Co. Anthony Malkin's grandfather, Lawrence Wien, in about 1961 created Empire State Building Associates to raise the money to buy the master lease on the property, by selling 3,300 units to individuals for $10,000 per unit.

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