NEW YORK — Investors in the Empire State Building have filed a lawsuit accusing the real estate magnates who took it public of short-changing them $300 million by refusing to sell the iconic skyscraper at a premium price.
According to a complaint filed Tuesday in a New York state court in Manhattan, Peter Malkin and his son Anthony put their own interests ahead of the building’s investors by spurning all-cash offers of as much as $2.3 billion for the building and $1.4 billion for Empire State Building Associates, which held the title and master lease.
Instead, the Malkins put the landmark building and 17 other properties into Empire State Realty Trust Inc., whose Oct. 1 IPO valued the property at just $1.89 billion and ESBA at just $1.1 billion, according to the complaint.
The lawsuit by plaintiff Marc Postelnek seeks class-action status on behalf of more than 2,800 investors who hold shares in ESBA, which was created in 1961 and was supervised by a Malkin company, Malkin Holdings.
It claimed the Malkins acted in bad faith by aborting a “bidding war” for the building, and instead enriched themselves by hundreds of millions of dollars through an IPO.
“Given their positions of control and authority over the fate of the Empire State Building,
the Malkins had a duty to act in the best interests of their investors,” the plaintiffs’ lawyer, John Rizio-Hamilton, a partner at Bernstein Litowitz Berger & Grossmann, representing Postelnek, told Reuters. “By failing to properly consider offers to maximize the building’s value, the Malkins breached that duty.”
The lawsuit seeks to recover profit that building investors allegedly lost because of the Malkins’ refusal to sell. Empire State Realty Trust, a real estate investment trust, is a successor to Malkin Holdings.
“These claims are wholly without merit and we will respond to them in court,” a spokeswoman for the REIT said Thursday.
ESBA had been created by Lawrence Wien, the father-in-law of Peter Malkin, and the shares were sold privately.
Postelnek oversees a trust for his grandmother, Mabel Abramson, one of the original ESBA investors.
Opened in 1931, the 102-story Empire State Building was the world’s tallest building for about four decades, until it was passed by the original World Trade Center’s north tower.
King Kong climbed the Empire State Building in a 1933 movie, and Tom Hanks and Meg Ryan finally met there in a climactic scene of the 1993 movie “Sleepless in Seattle.”
Empire State Realty Trust (ESRT) went public at $13 a share, the low end of the forecast range. In Thursday afternoon trading, the stock was down 5 cents at $15.30 on the New York Stock Exchange.
The case is Postelnek v. Malkin et al., New York State Supreme Court, New York County, No. 654456/2013.
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