Empire State Realty Trust (ESRT), which owns the iconic Empire State building and 18 other commercial properties, raised $930 million in its IPO, or $754 million after expenses, commissions and discounts.
But demand was light. Empire State Realty Trust priced shares at $13 each — the low end of the $13 to $15 range. Yet so far in today’s trading, the shares are up only about 3%.
It wasn’t easy to get the deal done either. For the past two years, Peter Malkin and his son Anthony Malkin (the leaders of ESRT) engaged in tough negotiations and even litigation with shareholders. In fact, a good chunk of the IPO proceeds will be used to buy the equity interest from the estate of Harry Helmsley.
Unfortunately, the delay of the transaction may have been harmful. Interest rates have been climbing, and that has put pressure on real estate investment trusts (REITs), including big names like Boston Properties (BXP) and Vornado Realty Trust (VNO).
But Empire State Realty Trust, as you can guess by the name, does have one thing that sets it apart. For some investors, investing in ESRT is all about getting a piece of the historic Empire State Building. The landmark is so popular that its observation decks generated a whopping $92 million in revenue in 2012 and attracted about 4.2 million tourists.
On top of that, ESRT’s portfolio includes about 548,000 square meters … and the overall occupancy is about 84%. That means there is still ample room for growth.
For now, though, that growth hasn’t been enough to get most investors excited and the timing simply seemed to be off for this REIT to hit the market.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
