January 22, 2013 / 9:36 PM / 5 years ago

UPDATE 1-Empire State Building investors to vote on first step to IPO

By Ilaina Jonas

NEW YORK, Jan 22 (Reuters) - The company that controls the Empire State Building has asked investors to approve a key step in selling the iconic New York skyscraper to the broader public in an initial offering.

Malkin Holdings LLC, which manages the building, is asking investors to approve transferring ownership to a company that can then go public.

The more than 2,800 investors in the property have until March 25 to vote on the move or abstain, and Malkin can also extend the deadline, according to a regulatory filing posted on Tuesday. To sell the building to the company that would go public, Malkin needs 80 percent of each of the three classes of investors in the building to approve the plan.

Winning approval is not a sure thing, some investors have told Reuters. The investors in the building are typically individuals, and it could be difficult to corral them.

Malkin and a trust that manages money from the estate of Leona Helmsley, the late real estate magnate, own the company that holds the long-term lease on the building. Under the proposed terms, their company would receive 48.4 percent of the value of the skyscraper, which was appraised at $2.53 billion, according to another document filed in December.

At least three investors told Reuters that they object to giving the leaseholders such a large percentage of the ownership. Another said he did not want to own publicly traded stock. Others support the plan as a way to cash out of a long-term investment they inherited from their parents and grandparents.

The Empire State Building, which was completed in 1931, was the world’s tallest building for four decades, although it was largely vacant in the early years. In 1961, individual investors had the chance to pay $10,000 for one of 3,300 “units” of Empire State Building Associates, the company that owns the building. Those units amounted to private partnership shares in the company.

The units, now held by 2,824 investors, could be worth more than $320,000 apiece, according to Tuesday’s filing. The units were sold in three groups of 1,100 each, and Malkin needs the approval of 80 percent of each the three groups.

Malkin is hoping to package the Empire State Building into a real estate investment trust, a type of company that pays out almost all of its earnings as dividends and does not have to pay most income taxes. He has transferred other buildings to the Empire State Building trust as well.

As of Sept. 30, 2012, the Empire State Building’s office space was 67.4 percent leased, or 32.6 percent vacant, as it undergoes an upgrade and as leasing in Manhattan remains sluggish. Midtown Manhattan leasing was down 26.5 percent in 2012 compared with a year earlier, and the vacancy rate stands at 10 percent, according to real estate services company Cushman & Wakefield Inc.

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