Lawsuit: Investors Harmed in Empire State Building IPO

Before you go, we thought you'd like these...
Empire State Building IPO hurt investors, lawsuit claims
John Moore/Getty Images
By Jonathan Stempel

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, %VIRTUAL-article-sponsoredlinks%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.

7 PHOTOS
5 Best Apps to Invest Smarter
See Gallery
Lawsuit: Investors Harmed in Empire State Building IPO

The promise: Offers customizable, themed portfolios of up to 30 stocks.
Price: Free
Available on: Website, iPhone

Motif lets you invest in a very narrow sector -- say, clean tech or companies tied to the housing rebound -- using one of 90 themed portfolios. The site requires a $250 minimum and charges a commission of $9.95 per portfolio.

You wouldn't want to use Motif for your retirement fund, but it's a fun way to invest your mad money if you play the market. The service could also be a good introduction to investing for novices, says MIT finance professor Andrew Lo.

The promise: Puts your investment data on a single dashboard and recommends ways to optimize your portfolio.
Price: Free
Available on: Website, iPhone, Android

This site-and-app combo syncs with more than 90 brokerages to track your 401(k), IRA, and stock market investments.

You can also see charts breaking down your asset allocation and risk level.

What really sets SigFig apart from other investing tools, though, is that the service checks your portfolio weekly for hidden fees, overcharges, and underperforming funds, and suggests alternatives.

The promise: Tracks and analyzes your investment, bank, and credit card accounts. App allows you to make payments and transfers.
Price: Free
Available on: Website, iPhone, Android

Best for investing and budget

By combining money management tools with a full listing of your investment accounts, Personal Capital provides a broad financial picture in a single application, says Jim Breune, editor of NetBanker.com, which covers online financial tools.

Personal Capital offers fee-based financial advice, but you don't need to buy in to use its website and mobile app.

Follow your investments in real time with an app.

Mobile offerings vary by brokerage (Fidelity's version is still the most downloaded), but most also let you check news and quotes, says Brett DiDonato of OnlineBrokerRev.com.

Price: Free
Available on: iPhone, Android, BlackBerry, Windows Phone

A treasure trove of financial info. Track your investments in real time or use interactive charts to get more detailed data about their performance.
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION
Read Full Story

People are Reading