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Bidders sticking fingers in Malkins’ REIT pie

5:48 pm, July 30, 2013

By Sarah Trefethen

One Grand Central Place

Baking can be challenging with kids around. They like to try to take the Hersey’s Kiss toppings and eat them before the cookies even go in the oven.

Peter and Anthony Malkin are facing a similar problem in the efforts to consolidate the various property-management responsibilities of Malkin Holdings (19 buildings in total) into a single, publically traded REIT, to be named after the star of the portfolio, the Empire State Building.

People keep trying to grab the best parts before they all get baked together.

In addition to at least four unsolicited offers on the Empire State Building, Malkin Holdings recently reported to the SEC that it has received an unsolicited offer for One Grand Central Place. The building, next to Grand Central Terminal on 42nd Street, is the second most valuable asset in the portfolio.

The Wall Street Journal has reported that the $710 million offer came from Andrew Penson, the low-profile owner of Grand Central Terminal and also one of the Empire State Building’s 2,800 owners and, according to the Journal, among those who object to the REIT.

Unlike the ESB bids, which all fall short of the iconic scraper’s appraised value of $2.52 billion, Penson’s offer on One Grand Central Place exceeds both the appraised and exchange value of that building, possibly putting greater pressure on the Malkins to fulfill their fiduciary duty to the ownership of 1GCP and sell the building outside of the proposed REIT. Meanwhile, the first of the Empire State Building offers, a bid of $2 million from Rubin Schron, is set to expire in less than 30 days, according to Jason Meister of Avison Young, who made the offer on Schron’s behalf.

“We received letters saying ‘thank you for your offer we’re going to respond in due course’, but you know … now 30 days has elapsed, and we’re interested in having a substantive response on that offer,” Jason said.

STEPHEN MEISTER

Stephen Meister, an attorney representing the ESB shareholders who are opposing the REIT plan in court (and Jason’s father) said that Penson’s above-appraised-value offer on the Grand Central building might have more more weight than the ESB offers. Those range from Schron’s $2 billion to an offer of $2.25 billion from Reuven Kahane, a San Francisco- based investor.

Nontheless, he said, his clients would also like to see a response to the outsanding offers.

“They’re not in favor of the REIT, and they’re hoping that Mr. Malkin will negotiate with the cash offers and see if they’ll increase their offers,” Stephen said.
A representative of Malkin Holdings said the company is not commenting on the offers beyond their SEC filings.

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