The investors who challenged Malkin Holdings’ plans to convert their ownership interests in the Empire State Building into a publicly traded REIT have settled the lawsuit for $55 million. The agreement is contingent on Malkin raising at least $600 million during the REIT conversion; 80 percent of the settlement will be in cash and 20 percent in shares in the new REIT. Law360 reported the settlement – which the parties reached back in September – based on recent Malkin SEC securities filings.
As you may recall, in the complaint, which was filed in New York County Supreme Court, one of Empire State Realty Trust’s investors alleged that Malkin sought “to consummate [the public offering of shares in the REIT] through self-interested consent solicitations that fail to provide the participants with material information sufficient to allow them to make informed decisions regarding whether to support the planned transaction.” The investors sought an injunction enjoining Malkin from completing the REIT conversion.
But now, assuming the settlement proceeds and the REIT conversion occurs, proceeds from the offering – which Malkin hopes will actually top $1 billion – would pay investors who wish to cash out of their equity in existing Malkin entities, service debt, and fund the remaining renovation work at the LEED-EB Gold Empire State Building (between $55 and $65 million, according to the offering’s SEC filing). The companies that Malkin intends to consolidate within the REIT currently own 12 buildings with 7.7 million square feet of office space; 7 of those properties and 5.8 million square feet, including the Empire State Building, are located in Midtown Manhattan. The other 5 are in Westchester (NY) and Fairfield (CT) counties.
The REIT, which would be publicly traded as Empire Realty Trust, the name of the eponymous company that currently owns the Empire State Building, would strategically focus on the leasing of commercial office space at Malkin’s existing Manhattan office properties. However, the REIT would also use a portion of the funds that its public offering could raise to acquire additional properties. Now that the suit is settled, this could indeed be very good news for New York City’s green building industry should the conversion move forward as planned and Malkin uses the proceeds to deploy advanced building technologies and retrofit an increased number of acquired New York City office buildings.