By Al Barbarino
No order is too tall for the owners of the Empire State Building.
Peter and Anthony Malkin have filed plans to form a Real Estate Investment Trust and sell shares of the iconic building in a bid to raise $1 billion.
Empire State Realty Trust, Inc. will be focused on properties across Manhattan and the greater New York metropolitan area, according to documents filed with the United States Securities and Exchange Commission on Monday.
“It’s a very smart move for the owners,” said Robert A. Knakal, chairman and founding partner at Massey Knakal Realty Services. “We’ve seen over the last few years the tremendous advantage that access to public capital has had for the REITS, which have become dominant office building owners in New York City. I think the strategy will work very well for them.”
Both Class A common stock and Class B common stock will be offered through the REIT. Shares of Class A common stock entitle holders to one vote per share, while Class B shares entitle holders to 50 votes per share.
As of September 30, 2011, the Malkins owned 7.7 million rentable square feet of office space between 12 office properties and were 79.9 percent leased. The Empire State Building comprises about 2.7 million square feet of the office space, as well as 163,655 rentable square feet of retail space.
Seven of the company’s properties, including the storied Empire State Building, are located in Midtown Manhattan, while the remaining five are located in Fairfield County, Connecticut and Westchester County, according to the documents.
Between December 31, 2010 and September 30, 2011, the company generated approximately $156.7 million and $197.4 million of revenue from the Empire State Building.
According to the IPO papers, the most famous building in the world makes more money from tourists than is does from office rents. During the nine months ended Sept. 30, the observatory brought in $62.9 million in revenue, while minimum rental revenue was $52.9 million, according to the documents, representing approximately 42 percent of the building’s total revenue since 2010.
While the offering could prove to be a wise move on the part of the owners and a plausible addition to the portfolios of real estate investors, the IPO doesn’t necessarily prompt other trophy building owners throughout the city to go public.
“The thing about becoming a REIT is that you need to have significant scale in order to have it make sense,” Knakal said. “There are very few three million-square-foot buildings out there.”
