After months of contentious behind-the-scenes battles, the public may finally get its chance to own a piece of a New York City landmark — the Empire State Building.
The real estate family that controls the 102-story Art Deco tower could move ahead as soon as this week with plans to sell shares to the public through a real estate investment trust, or REIT. It could be one of the largest initial public offerings ever of such a trust, in a deal valued at more than $5 billion.
But even as Malkin Holdings races forward with the planned offering, which includes the iconic tower and 18 other office properties it operates in New York City and in Stamford, Conn., prospective buyers for the Empire State Building continue to come out of the woodwork.
Last week, Joseph Sitt, a New York City landlord, increased his earlier bid. His company, Thor Equities, is now proposing to buy Empire State Building Associates, which owns the land, the building and the lease, for $1.4 billion in cash. That tops Mr. Sitt’s offer from earlier this summer, and is higher than the $1.18 billion that the entity is valued at as part of the REIT.
“Seeing as this new offer came in above both the appraised and exchange values in the proposed REIT, that leads me to believe they are taking it very seriously,” said Jason Meister, an investment broker with Avison Young who represents Thor Equities.
The offer by Mr. Sitt is the latest in a string of unsolicited bids that have been rebuffed by Peter L. Malkin and his son, Anthony E. Malkin, who contend that their plan, which has already been approved by stakeholders, is more valuable. Furthermore, most, if not all, of the bidders have had communications with Richard Edelman, a stakeholder in the Empire State Building who has led a group of dissidents opposed to the planned REIT.
That has led to questions about whether the offers for the building are real or just attempts to derail the initial public offering. One of the “bids” was made on a single sheet of paper and provided no information about where the buyer would find the money to finance the building’s purchase. Additionally, Mr. Meister, who represents Mr. Sitt at Thor, is the son of Stephen Meister, a lawyer representing some of the dissident shareholders.
This should be a chill-the-Champagne moment for the Malkins. Family members, who are minority owners of the building, have already won several crucial rounds in a long-running battle with dissident stakeholders. With the public offering, the Malkins would be catapulted into the upper echelons of Manhattan real estate — their stake could be valued at an estimated $730 million and provide other legal and tax benefits. Anthony Malkin would become chairman of a new company, Empire State Realty Trust.
In 1961, 3,300 units in the building were sold to stakeholders at $10,000 a unit, with some individuals buying multiple units. After about a year of back-and-forth, the Malkins early this summer persuaded the required 80 percent of the building’s roughly 3,000 stakeholders to vote in favor of going public.
While the Malkins still face a few remaining hurdles in their fight with the dissidents, including a court ruling expected this fall on whether a judge’s ruling on New York’s limited liability corporation laws was legal, they are pressing ahead with their plan for a public offering.
A spokesman for the Malkins did not respond to an e-mail seeking comment.
There are also questions swirling around demand for a REIT featuring the Empire State Building as one of its cornerstones. While some investors will probably be drawn to the romantic notion of owning a piece of the fabled skyscraper, some analysts note that the building and several of the other properties included in the REIT are not viewed as modern, first-class office buildings. In recent years, the Malkins have embarked on a major renovation of the Empire State Building that is drawing a better, more corporate class of tenants and yielding higher rents.
But the once-hot market for real estate investment trusts has cooled considerably since this spring. A Bloomberg index of office REITS is down 10.5 percent since hitting a four-and-a-half-year high in late May.
“REITs did extremely well early in the year, but share prices have pulled back since May,” said Michael Knott, a managing director with real estate research firm Green Street Advisors. He said, however, that New York office REITs have held up better than those in other parts of the country, in the belief that Manhattan real estate has stabilized.
While some of the bidders hope that the wobbly REIT market has opened the door for them to sweep in with a competing offer, analysts say the bids, so far, appear to be falling short. “The offers don’t appear high enough to persuade the Malkins to change direction,” Mr. Knott said.
This article has been revised to reflect the following correction:
Correction: September 18, 2013
An earlier version of this article identified incorrectly Jason Meister’s profession. He is an investment broker with Avison Young who represents Thor Equities, not a lawyer.
