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What a Deal: Empire State and Westport Pizzeria

UPDATE A New York judge today cleared the way for a public offering of shares in the Empire State Building and properties on Westport’s Main Street, including Westport Pizzeria.

WestportNow.com Image
Westport Pizzeria, two adjacent retail stores, and three others on Westport’s Main Street would be rolled into the Empire State Building offering. (CLICK TO ENLARGE) Contributed photo

New York Supreme Court Justice O. Peter Sherwood denied a motion by opposing shareholders to declare illegal a plan that would allow Malkin Holdings, controlled by the Malkin family of Greenwich, to roll the properties into a real estate investment trust.

The Westport properties include 66-99 Main St., current home to Nike Running, Allen Edmonds, and Theory, and 103 (former home of Kate Spade, now empty), 105 (Francois du Pont Jewelers), and 107 (Westport Pizzeria) Main St.

Under the plan, the Empire State Building—owned by Empire State Building Associates LLC, an entity controlled by Malkin—would join at least 20 other properties in the REIT called Empire State Realty Trust Inc. and launch an initial public stock offering. The IPO could bring $1 billion, according to financial advisers.

The plan requires support from 80 percent of each of the three groups of investors who as early as 1961 put money in the entity that became the limited liability company.

Last month, Malkin filed regulatory documents that said it had garnered about 95 percent of the investor votes it needs to cross the 80 percent threshold.

Once Malkin reaches that threshold, it claims the right to force any remaining investors to sell back their stakes for $100 each unless they drop their opposition. The units, now held by 2,824 investors, could be worth more than $320,000 apiece if the REIT becomes publicly traded, according to real estate experts.

The decision by Sherwood involved that provision. Opponents of the REIT plan contend that Malkin lost the right to force holdouts to sell their holdings in 2001, when he converted Empire State Building Associates into a limited liability company from a partnership.

Malkin bought the one-story building housing Westport Pizzeria and two adjacent retail stores for $8.2 million or $1,955 a square foot in 2006, at the time an apparent record for the street. (See WestportNow Nov. 2, 2006)

Three years earlier, in 2003, a Malkin entity paid $18.1 million for neighboring 66-99 Main St., or about $1,046 a square foot. (See WestportNow April 19, 2003)

A company official said the 2006 transaction was a strategic purchase because it owns the adjacent property, and it will benefit them in the long term.

Besides the Empire State Building and the Westport Main Street properties, other Malkin holdings include Stamford’s Metro Center and First Stamford Place; Merritt View in Norwalk, and other commercial, retail, and residential properties in New York City and elsewhere.

If it goes ahead, the Malkin offering would be the second-biggest initial public offering of a U.S. real estate investment trust on record.

“We are pleased by the court’s ruling and are proceeding with our solicitation with the intention of closing as soon as we reach the approval threshold,” said Hugh Burns, spokesman for Malkin Holdings. “The fact is that far more investors support this transaction than oppose it. We are focused on delivering the majority what they want as quickly as possible.”

There was no immediate comment from the plans’ opponents, but their lawyers have said they would appeal if the ruling went against them.

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