Shares in the Empire State Building will go on sale to the public in an IPO valued at $1.07 billion, according to a Security and Exchange Commission filing.
Empire State Realty Trust Inc. will be one of the biggest initial public offerings of a U.S. real estate investment trust. The REIT shares will be priced at $13 to $15 each, according to a regulatory filing, and trade on Oct. 1 on the New York Stock Exchange under the symbol ESRT.
The decision to IPO the building ended a dispute between two groups of owners of the iconic 102-story tower. One group wanted to keep the building's ownership just as it had been since 1961, when the Empire State Building was purchased by a syndicate of some 2,800 owners created by Malkin Properties. The other group wanted to roll up the Empire State landmark with 18 other New York area properties into a real estate investment trust, or REIT, and sell shares of it to the public.
So, will these public shares be any different from those of any other REIT?
No, said Lawrence Longua, a professor at New York University's Schack Institute of Real Estate. "It's a plain vanilla REIT," he said, "with a big, famous building attached."
Buyers, as with any REIT, won't be able to claim depreciation, as they would if they'd bought the real estate itself. They will, however, as with other REITs, get a dividend. Management, explained Longua, is required to pay a dividend of at least 90 percent of the taxable income.
"So, in an indirect way, you're getting the benefit of depreciation but paying taxes on the dividend," Longua said.
All investors, he said, were eligible to buy in.
But should they? Some investors say that the properties included in the REIT are top ones and the New York commercial real estate market is in an upswing.
The Malkin family, prime movers in the pro-IPO campaign, had argued that creation of a REIT would deliver needed liquidity, aid capital appreciation, increase distribution and render management more accountable and more transparent.
When Richard Edelman, who had headed the anti-IPO faction, spoke earlier this year with ABC News, he said his family, like those of many of the original 1961 buyers, were not sophisticated or wealthy investors but rather middle-class.
"My grandparents, Max and Sophie Edelman, for some remarkable reason, had $100,000 available to purchase units," he said.
That stake could now be worth $3.2 million.
Most of the original families, said Edelman, bought units for the predictable income they paid and never intended to sell. Instead, they hoped to pass ownership down to their children and grandchildren.
The Empire State Building was the largest skyscraper in the world until the World Trade Center surpassed it in 1973. With that skyscraper's destruction in the terror attacks of September 2001, the Empire State Building, at 1,454 feet, was again the tallest structure in the city.
It has now been surpassed by the new ground zero building, which tops out at 1,776 feet.
- Real Estate
- New York Stock Exchange
- the Empire State Building