By Ilaina Jonas
NEW YORK, Nov 2 (Reuters) - The group leading an effort to create a publicly traded company with the Empire State Building as its centerpiece has agreed to pay $55 million to settle a class-action lawsuit that sought to stop the deal, according to a regulatory filing.
Malkin Holdings LLC, which plans to create the Empire State Realty Trust Inc, and its partner, the estate of Leona M. Helmsley, were sued by some investors in the more than 18 properties that will constitute the proposed real estate investment trust.
The terms of the agreement, which includes investors in several of the properties, were included in updated documents describing the proposed REIT and filed on Friday with the U.S. Securities and Exchange Commission.
Under the proposed agreement, which must receive court approval, neither the Malkin Group nor the estate will admit any guilt, and the class participants have agreed to support the REIT and the proposed initial public offering.
The fate of the REIT now rests in the hands of the more than 2,800 investors in the Empire State Building who must approve the consolidation of the properties and the IPO. Approval requires 80 percent of each of the three investor groups in that building.
A few investors, some of whose parents or grandparents invested in the Empire State Building in 1961, do not like the plan. Their reasons vary. Some opposed the 50-50 split between the management company, whose main owner is the Helmsley Trust, and the investors. The management company holds a 114-year sublease on the property.
Others do not want to own a publicly traded company and prefer to remain a private real estate investor.
“I can’t imagine any ESB investor changing a no vote to yes for this extra 1 percent” said Richard Edelman who opposes the plan. His grandparents were original investors in the Empire State Building.
According to the proposed settlement contained in the filing, an agreement, dated Oct. 10. 2012, was reached after Malkin agreed to align the tax treatment of the investors with his own.
Attorneys for the plaintiffs could not reached for immediate comment.
A representative from Malkin Holdings declined to comment.
Malkin proposed the REIT after the Helmsley Trust said it wanted to sell its stake in the Empire State Building and its other properties proposed for the REIT.
The payment and the settlement are conditional upon the approval of the REIT and the IPO, according to the filing.