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Empire State Building REIT IPO - ESB / (FSBO, FXR, BRK, ELV, DRMN, RVR VU)

The owners of the Empire State Building are doing an IPO, tossing in a few other Manhattan properties into the pot. The REIT will be split-ownered, so the current owners will control the REIT through the B-shares. (Must have read the Facebook IPO prospectus.) The Empire State Realty Trust will trade as ESB.

Revenue is about $156 million and earnings about $71 million versus a $1 billion IPO size. The sellers expect to put $200 million into renovations over the next year. About $500 million went into the Empire State already.

My spin: Likely will be a hot seller on the basis of the name alone. As an investment, maybe long-term rather than short. Reports are that the Empire State building is 99% tenanted. As the marketing of ESB begins, we'll be reading a lot of Realtor fluff about "New York's booming real estate market." And don't forget HUGE European and Asian demand for New York City property!

Just remember last week's news was about a new mid-town office tower that is mostly vacant: 11 Times Square, which is 60% vacant. Prudential has taken a write-down on it.

The legendary 666 Fifth Avenue, the 1.8 billion dollar boon-doggle that sold just before real estate crashed in 2007, is 30% vacant. Its owners have done a re-structuring that is hailed as a model of modern real estate finance. In Florida, a reduction of principal and a cut in interest rates would be called a homeowner default. But the NY Times isn't writing the copy for the Florida papers.

As the world in general and finance in particular downsizes and moves to cheaper real estate in Jersey City or goes on-line, how much pricey Manhattan office space do you really need?

Just my opinion.


Empire State Building owner files for $1 bln IPO

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.