NEW YORK, N.Y. – Thousands of onetime investors in the Empire State Building can’t sue over claims they were shortchanged by the deal that turned the iconic skyscraper into a public stock, a judge has ruled.
The aggrieved stakeholders —people who had held Empire State Building shares that were sold privately in 1961 — had said they lost more than $400 million in potential profits when the managing owners rebuffed interested private buyers in order to sell public shares in the building immortalized in “King Kong” and “Sleepless in Seattle.” But a $55 million settlement last year barred them from suing further over the October initial public offering, the judge wrote as he dismissed their lawsuit in a ruling made public Monday.
“The settlement agreement … contains a covenant not to sue,” among other provisions foreclosing more litigation, Manhattan state Supreme Court Justice O. Peter Sherwood wrote.
The lawsuit pit roughly 3,000 investors versus father-and-son real estate magnates Peter and Anthony Malkin. A lawyer for some of the investors, Stephen Meister, said Tuesday they intend to appeal. Another plaintiffs’ lawyer, John Rizio-Hamilton, declined to comment, as did an attorney for the Malkins, David Pegno.
Completed in 1931, the 102-story skyscraper was the world’s tallest building until the World Trade Center supplanted it in 1972. When the Empire State Building changed hands in 1961, the buyers sold shares at $10,000 each to help finance the deal. Some investors were everyday New Yorkers who pulled together just enough cash to get partial shares.
Last year, the Malkins spearheaded an IPO plan that combined the skyscraper with 11 other properties in their portfolio in New York and Connecticut. Shares began trading at $13 a share and were at about $16 Tuesday; the stock trades under the symbol “ESRT,” for Empire Real Estate Trust Inc.
The former stakeholders acknowledged the May 2013 settlement’s provisions against future claims, but they argued their suit was viable because it concerned offers that emerged in the months after the agreement.
The $13-a-share price valued the skyscraper at $1.89 billion, but the Malkins turned down cash offers as high as $2.3 billion, the suit said. It argued that those offers were better for the investors, but that the Malkins favoured the IPO because it would yield them more than $300 million from fees and a profit-sharing provision.