Empire State Realty Trust Files $1B NYSE IPO

Empire State Realty Trust, the company that controls the landmark Empire State Building in New York City, disclosed in a Securities and Exchange Commission (SEC) filing this month that it is planning a $1 billion initial public offering (IPO) in the coming months. Empire State Realty Trust will list on the New York Stock Exchange and trade under the "ESB" ticker, according to its SEC fillings. The realty trust controls 12 properties including the Empire State Building, two Westchester County properties in downtown White Plains and Harrison, and several other locations in Connecticut. Bank of America Merrill Lynch and Goldman Sachs Group Inc. will advise on the IPO.

According to Bloomberg, Malkin Holdings LLC, which owns the Empire State Building in conjunction with the estate of Leona Helmsley, said last November that it was considering joining a new REIT. Malkin Holdings is led by Peter Malkin and his son Anthony Malkin. The move is the culmination of efforts by the Malkin family to simplify control of its sprawling real estate holdings, reported the New York Times. The IPO will allow the Malkins to convert the equity held by other investors into stock in the new company, Empire State Realty Trust.

"Because it's got an iconic building as a centerpiece, I expect it will be successful anyway, but you're going to have more or less a higher percentage" of individual investors, said Lawrence Longua, director of the REIT Center at New York University's Schack Institute of Real Estate in a Businessweek article. For institutional investors, the owners "are very recognized names in the industry, so I suspect all in all, it'll do well," he said.

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NAR Expects Steady Improvement in Commercial Market

The National Association of Realtors (NAR) held their 2010 Conference & Expo in New Orleans this month, coined "NARdiGras 2010: A Fountain of Inspiration" with 125 education sessions and insights from business leaders. NAR's Chief Economist Lawrence Yun and Hugh Kelly, clinical professor of real estate at New York University Schack Institute of Real Estate, shared their predictions surrounding the commercial market and indicated a slight improvement in commercial lending.

"Banks' profits have returned to healthy levels. As a result, it is inevitable they will return to the business they were created for, which is lending," said Yun. "Commercial real estate has experienced a sharp price correction, but there is still a shortage of buyers because of lack of adequate capital resources." Yun said with imports and exports in the U.S. rising, the demand for industrial space will improve. His commercial forecast shows steady improvement in the market with rents stabilizing and net absorption slowly improving. Yun also predicts a moderate GDP expansion of 2 percent to 2.5 percent in the next two years and an unemployment rate of eight percent in 2012 and six percent in 2015.

Kelly pointed out that most commercial mortgages have been random and idiosyncratic, stressing that the lending environment should not remain that way. "The banks are in the driver's seat, meaning they can cherry-pick deals and there is no stigma to turning away business," said Kelly. "The capital flow in the commercial real estate market has been very selective. To achieve full recovery, lending practices must improve."

For more news and information visit Blumberg Capital Partners.