No kidding the Empire State Building to the Highest Bidder. Generations have heard the stories of the gullible who believe they have purchased the iconic building on Fifth Avenue and West 34 Street in midtown Manhattan New York City. Like other well known landmarks like the Brooklyn Bridge the joke hinges on the humor of someone believing these sites would be for sale. Currently however investors are engaged in a dramatic bidding contest to purchase the 102-story skyscraper.
Father and son commercial property moguls are at the center of the drama. Peter and Andrew Malkin want to take the ownership of the building public, the pair are faced with legal issues. In a recent letter filled with the U.S. Securities and Exchange Commission and sent to the Empire State Buildings 2,800 stakeholders the Mulkins reported two unsolicited bids of $2.0 billion, and $2.1 billion.
In the letter made public soon after they state “We are reviewing the offers and their terms. We consider all matters, including unsolicited offers, consistent with our fiduciary duties, to form a judgment on what action is appropriate.” A third offer wasn’t long in coming this time from Thor Equities for an amount disclosed as being over $21 billion. Thor Equities is run by New York landlord Joseph Sitt.
The Malkins fought a long battle to convince stakeholders that initial public offering was in their best interest, and in the best interest of the building. Based on the recent flurry of bids this could be at the least the second largest IPO for a U.S.-based REIT to date.
Despite the success of the bids legal issues aren’t completely behind the Malkins and the 80% of the stakeholders who agreed to the IPO listing. Stakeholders against the IPO plan argued in New York that a buyout provision for such a plan isn’t legal. They still hope to force a vote giving stakeholders the chance to consider unsolicited offers themselves. This is the reasoning behind the letter the Malkins sent first to the commission, and then to the stakeholders stating they will consider all offers.
According to Stephen Meister the attorney for the unhappy stakeholders, the Empire State Building appraised value is $2.5 billion just shy of the last offer made public. If Sitt’s offer is higher it could be the more attractive offer, but it still might not result in good news for stakeholders. Meister states the Malkins have given his clients no assurances REIT shares will trade near that value no matter how close it comes to the real estimated value of the building. The minority stakholders opposing the plan have received 10 day buyout notices. This notice offers them the chance to either join the majority or run the risk of losing ownership of their units.
The Empire State Building was a note of optimism opening during the Great Depression, and the building didn’t truly become profitable as office spaces until the 1950′s. The building recently had a $550 million dollar renovation for energy efficiency.