S-4/A 1 d283359ds4a.htm AMENDMENT NO. 1 TO FORM S-4 Amendment No. 1 to Form S-4
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As filed with the Securities and Exchange Commission on May 8, 2012

Registration No. 333-179486

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Pre-Effective Amendment No. 1 to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

EMPIRE STATE REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   6798   37-1645259

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

One Grand Central Place

60 East 42nd Street

New York, New York 10165

(212) 953-0888

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Anthony E. Malkin

Chairman, Chief Executive Officer and President

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

 

With copies to:

 

Arnold S. Jacobs, Esq.

Steven A. Fishman, Esq.

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

(212) 969-3000

 

Larry P. Medvinsky, Esq.

Jason D. Myers, Esq.

Clifford Chance US LLP

31 West 52nd Street

New York, New York 10019

(212) 878-8000

 

 

Approximate date of commencement of the proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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Empire State Building

Associates L.L.C.

  60 East 42nd St. Associates L.L.C.  

250 West 57th St.

Associates L.L.C.

One Grand Central Place

60 East 42nd Street

New York, New York 10165

NOTICE OF CONSENT SOLICITATION TO PARTICIPANTS

                    , 2012

Malkin Holdings LLC, the supervisor of each limited liability company listed above, requests that you consent to the following:

Proposed consolidation of your subject LLC into Empire State Realty Trust, Inc. As described in the attached Prospectus/Consent Solicitation Statement, Malkin Holdings LLC, as supervisor, proposes a consolidation of certain office and retail properties in Manhattan and the greater New York metropolitan area owned by Empire State Building Associates L.L.C., 60 East 42nd St. Associates L.L.C. and 250 West 57th St. Associates L.L.C., or the subject LLCs, and certain private entities supervised by the supervisor, and certain related management businesses into Empire State Realty Trust, Inc., or the company. The consolidation is conditioned, among other things, upon the closing of the initial public offering, or the IPO, of the company’s Class A common stock. The company will issue to each of the participants in the subject LLCs a specified number of shares of Class A common stock that the company expects to be listed on the New York Stock Exchange. Each participant in a subject LLC may alternatively elect to receive cash consideration in lieu of a portion of the Class A common stock otherwise issuable in the consolidation (at a price per share equal to the IPO price reduced by the underwriting discount per share paid by the company in the IPO), if the consolidation is approved and consummated by such subject LLC, provided that the aggregate cash consideration paid to participants in such subject LLC will not exceed [12-15%] of the aggregate consideration payable to all participants in such subject LLC (excluding the Wien group, as hereinafter defined). The Wien group will not receive cash consideration in the consolidation at the time of the IPO and will therefore not be entitled to make any such cash election. After the series of transactions in which the subject LLCs will be consolidated into the company, the company will own, through direct and indirect subsidiaries, the assets of the subject LLCs and the assets of the private entities, along with certain related management businesses. There are 22 private entities involved in the consolidation, including the operating lessees of each of the subject LLCs, from which all required consents to the consolidation have previously been obtained. Attached to the supplement for each subject LLC as Appendix B is the contribution agreement for each subject LLC, which describes the terms of the consolidation in detail. Only the participants holding participation interests in a subject LLC during the consent solicitation period are entitled to notice of, and to vote “FOR” or “AGAINST,” the proposed consolidation. For the reasons the supervisor believes this proposal is fair and reasonable, see “Background of and Reasons for the Consolidation.”

Proposal to authorize the supervisor to sell or contribute the property interests in a third-party portfolio transaction. As a potential alternative to the consolidation, the supervisor requests that the participants consent to the sale or contribution of the subject LLCs’ property interests as part of a sale or contribution of the properties owned by the subject LLCs and the private entities as a portfolio to a third party. The third-party portfolio transaction would be undertaken only if the supervisor determines that the offer price includes what the supervisor believes is an adequate premium above the value that is expected to be realized over time from the consolidation and certain other conditions are met. For the reasons the supervisor believes this proposal is fair and reasonable, see “Third-Party Portfolio Proposal.”

Voluntary pro rata reimbursement program for expenses of legal proceedings with former property manager and leasing agent. In addition, the participants are being asked to consent to a voluntary pro rata reimbursement to the supervisor and Peter L. Malkin for the prior advances of all costs, plus interest, incurred in connection with litigations and arbitrations with the former property manager and leasing agent of the properties owned by the subject LLCs. For the reasons the supervisor believes this proposal is reasonable, see “Voluntary Pro Rata Reimbursement Program for Expenses of Legal Proceedings with Former Property Manager and Leasing Agent.”


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The supervisor invites you to vote using the enclosed consent form because it is important that your participation interest in your subject LLC be represented. Please sign, date and return the enclosed consent form in the accompanying postage-paid envelope. You also may revoke your consent to the consolidation, the third-party portfolio proposal, or both, at any time in writing before the later of the date that consents from participants equal to the percentage required to approve the consolidation and the third-party portfolio proposal, as applicable, as set forth later in the attached Prospectus/Consent Solicitation Statement are received by your subject LLC and the 60th day after the date of the attached Prospectus/Consent Solicitation Statement.

Malkin Holdings LLC

 

By:  Peter L. Malkin   Anthony E. Malkin
         Chairman   President

The attached Prospectus/Consent Solicitation Statement is dated                     , 2012 and is being mailed to participants on or about             , 2012.


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The information in this Prospectus/Consent Solicitation Statement is not complete and may be changed. A registration statement relating to the securities has been filed with the Securities and Exchange Commission. Empire State Realty Trust, Inc. may not sell the securities offered by this Prospectus/Consent Solicitation Statement until the registration statement filed with the Securities and Exchange Commission becomes effective. This Prospectus/Consent Solicitation Statement is not an offer to sell these securities and Empire State Realty Trust, Inc. is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED MAY 8, 2012

PROSPECTUS/CONSENT SOLICITATION STATEMENT

 

LOGO

shares of Class A common stock, par value $.01 per share

 

 

If you are a participant in any of the following subject LLCs, your vote is very important:

 

Empire State Building

Associates L.L.C.

 

60 East 42nd St.

Associates L.L.C.

 

250 West 57th St.

Associates L.L.C.

Malkin Holdings LLC, the supervisor of three publicly-registered entities, Empire State Building Associates L.L.C., 60 East 42nd St. Associates L.L.C. and 250 West 57th St. Associates L.L.C., or the subject LLCs, requests that you, as a holder of a participation interest in one or more of the subject LLCs, vote on whether to approve the proposed consolidation of the subject LLC in which you are a participant into Empire State Realty Trust, Inc., or the company, as part of a consolidation of office and retail properties in Manhattan and the greater New York metropolitan area owned by the subject LLCs and the private entities supervised by the supervisor, along with certain related management businesses, into the company, as described in more detail herein. Such transaction is referred to herein as the consolidation. The principals of the supervisor include Peter L. Malkin and Anthony E. Malkin.

The supervisor believes you will benefit from this consolidation through newly created opportunities for liquidity, enhanced operating and financing abilities and efficiencies, combined balance sheets, increased growth opportunities, enhanced property diversification, and continued leadership by the principals of the supervisor under the accountability of the governance structure of a reporting company with the U.S. Securities and Exchange Commission, or the SEC, with a board of directors consisting predominantly of independent directors. Anthony E. Malkin will be the only management member of the board of directors.

The supervisor believes that the consolidation is the best way for participants to achieve liquidity and maximize the value of their investment in their subject LLC. Following the consolidation, participants may liquidate their investments and realize current values in cash as and when they desire (subject to the restrictions of the applicable U.S. federal and state securities laws and after expiration of the lock-up period as described in this prospectus/consent solicitation) or may hold shares of Class A common stock they receive in the company in which certain executives of the supervisor will be members of the senior management team and Anthony E. Malkin, an executive and principal of the supervisor, will be Chairman, Chief Executive Officer, President and a director of the company. The company intends to apply to have its Class A common stock listed on the New York Stock Exchange under the symbol “ESB.”

The supervisor recommends that you vote “FOR” the consolidation. The Malkin Holdings group (as defined herein), will receive substantial benefits from the consolidation and have conflicts of interest making this recommendation. See “Conflicts of Interest.”

As a potential alternative to the consolidation, the supervisor also requests that the participants consent to the sale or contribution of the subject LLCs’ property interests as part of a sale or contribution of the properties owned by the subject LLCs and the private entities as a portfolio to an unaffiliated third party. While the supervisor believes the consolidation represents the best opportunity for participants to achieve liquidity and to maximize the value of their investment, the supervisor believes it also is in the best interest of all participants for the supervisor to have the flexibility and discretion, subject to certain conditions, to accept an offer for the portfolio of properties from an unaffiliated third party if the supervisor determines that the offer price includes what the supervisor believes is an adequate premium above the value that is expected to be realized over time from the consolidation.


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The supervisor recommends that you vote “FOR” the third-party portfolio transaction proposal. The Malkin Holdings group will receive substantial benefits from the consolidation and have conflicts of interest making this recommendation. See “Conflicts of Interest.”

Participants also are being asked to consent to a voluntary pro rata reimbursement program pursuant to which the supervisor and Peter L. Malkin, a principal of the supervisor, will be reimbursed for the prior advances of all costs, plus interest, incurred in connection with the legal proceedings required to remove and replace the former property manager and leasing agent. The supervisor believes that the voluntary pro rata reimbursement program is fair and reasonable because the successful resolution of the legal proceedings allowed the properties owned by the subject LLCs and certain of the private entities to participate in a renovation and repositioning turnaround program conceived and implemented by the supervisor. The estate of Leona M. Helmsley, or the Helmsley estate, as part of an agreement with the supervisor covering this and other matters, has paid the voluntary pro rata reimbursement to the supervisor for its pro rata share of costs advanced, plus interest, which totaled $5,021,048.

This solicitation of consents expires at 5:00 p.m., Eastern time on                     , 2012, unless the supervisor extends the solicitation period for one or more proposals.

The Wien group, which consists of each of the lineal descendants of Lawrence A. Wien, including Peter L. Malkin and Anthony E. Malkin (including spouses of such descendants), any estates of any of the foregoing, any trusts now or hereafter established for the benefit of any of the foregoing, or any corporation, partnership, limited liability company or other legal entity controlled by Anthony E. Malkin for the benefit of any of the foregoing, collectively owns participation interests in the subject LLCs and has advised that it will vote in favor of the consolidation and the third-party portfolio proposal. These participation interests represent the following percentage ownership for each subject LLC: 8.5921% for Empire State Building Associates L.L.C., 8.7684% for 60 East 42nd St. Associates L.L.C. and 7.3148% for 250 West 57th St. Associates L.L.C.

 

 

The supervisor and the Malkin Holdings group receive substantial benefits and from inception have had conflicts of interest in connection with the subject LLCs, including in connection with the consolidation or a third-party portfolio transaction. There are material risks and potential disadvantages associated with the consolidation or a third-party portfolio transaction. The supervisor and the Malkin Holdings group will receive substantial benefits in connection with the consolidation or a third-party portfolio transaction. See “Risk Factors” beginning on page 76 and “Conflicts of Interest” beginning on page 226.

If you are a participant in Empire State Building Associates L.L.C. or 60 East 42nd St. Associates L.L.C., and you vote “AGAINST” the consolidation or the third-party portfolio transaction proposal, you do not vote or you “ABSTAIN” and your subject LLC participates in the consolidation, your participation interests will be subject to a buyout if you do not vote in favor of the consolidation or third-party portfolio transaction proposal within ten days after notice that the required supermajority consent has been received, and the buyout amount for your interest, which is equal to the original cost less capital repaid, but not less than $100 and is currently $100, would be substantially lower than the consideration you would receive in connection with the consolidation or third-party portfolio transaction. Unanimity on the consents is required pursuant to the organizational documents of Empire State Building Associates L.L.C. and 60 East 42nd St. Associates L.L.C. with respect to both the consolidation and the third-party portfolio proposal; therefore, a participant in either of such subject LLCs who does not vote in favor of either the consolidation or third-party portfolio transaction proposal (and does not change his or her vote after notice that the requisite supermajority consent has been obtained) will be subject to this buyout regardless of whether either or neither transaction is consummated.

THE SUPERVISOR BELIEVES THAT THE CONSOLIDATION PROVIDES SUBSTANTIAL BENEFITS AND IS FAIR TO THE PARTICIPANTS IN EACH SUBJECT LLC AND RECOMMENDS THAT ALL PARTICIPANTS VOTE “FOR” THE CONSOLIDATION. SEE “BACKGROUND OF AND REASONS FOR THE CONSOLIDATION—THE SUPERVISOR’S REASONS FOR PROPOSING THE CONSOLIDATION.”


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THE SUPERVISOR BELIEVES IT IS IN THE BEST INTERESTS OF THE PARTICIPANTS TO PROVIDE THE SUPERVISOR WITH THE AUTHORITY TO APPROVE A THIRD-PARTY PORTFOLIO TRANSACTION AS AN ALTERNATIVE TO THE CONSOLIDATION AND RECOMMENDS THAT ALL PARTICIPANTS VOTE “FOR” THE THIRD-PARTY PORTFOLIO PROPOSAL. SEE “THIRD PARTY PORTFOLIO PROPOSAL” FOR THE SUPERVISOR’S REASONS FOR RECOMMENDING APPROVAL OF THE PROPOSAL.

THE SUPERVISOR BELIEVES THAT THE VOLUNTARY PRO RATA REIMBURSEMENT PROGRAM IS FAIR AND REASONABLE AND RECOMMENDS THAT ALL PARTICIPANTS WHO HAVE NOT PREVIOUSLY CONSENTED TO THE VOLUNTARY PRO RATA REIMBURSEMENT PROGRAM “CONSENT TO” THE PROPOSAL. SEE “VOLUNTARY PRO RATA REIMBURSEMENT PROGRAM FOR EXPENSES OF LEGAL PROCEEDINGS WITH FORMER PROPERTY MANAGER AND LEASING AGENT” FOR A DISCUSSION OF THE SUPERVISOR’S REASONS FOR RECOMMENDING APPROVAL OF THE PROPOSAL AND THE BENEFITS TO THE SUPERVISOR.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Class A common stock or passed upon the accuracy or adequacy of this Prospectus/Consent Solicitation Statement. Any representation to the contrary is a criminal offense.

After you read this Prospectus/Consent Solicitation Statement, the company and the supervisor urge you to read the accompanying supplement for your subject LLC. The supplement contains information particular to your subject LLC. This information is material in your decision whether to vote “FOR” or “AGAINST” the consolidation.

THIS PROSPECTUS/CONSENT SOLICITATION IS AUTHORIZED FOR DELIVERY TO PARTICIPANTS ONLY WHEN ACCOMPANIED BY ONE OR MORE SUPPLEMENTS RELATING TO THE SUBJECT LLCS IN WHICH SUCH PARTICIPANTS HOLD PARTICIPATION INTERESTS. SEE “WHERE YOU CAN FIND MORE INFORMATION.”

WHO CAN HELP ANSWER YOUR QUESTIONS?

If you have more questions about the proposed consolidation or would like additional copies of this Prospectus/Consent Solicitation Statement or the supplement relating to your subject LLC(s) (which will be provided at no cost), you should contact the person designated on the consent form sent to you.

To obtain timely delivery, you should request this information no later than                     , 2012.

The date of this Prospectus/Consent Solicitation Statement is                     , 2012.


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE CONSOLIDATION

     1   

WHO CAN HELP ANSWER YOUR QUESTIONS?

     12   

SUMMARY

     13   

Purpose of this Prospectus/Consent Solicitation

     13   

Description of the Company and the Subject LLCs

     14   

Overview

     14   

The Company’s Competitive Strengths

     16   

Business and Growth Strategies

     18   

Company Information

     19   

The Properties

     20   

Background of and Reasons for the Consolidation

     22   

The Subject LLCs, the Private Entities and the Management Companies

     22   

The Supervisor’s Reasons for Proposing the Consolidation

     26   

Benefits of Participation in the Consolidation

     27   

Third-Party Portfolio Transaction

     30   

Risk Factors

     31   

Conflicts of Interest and Benefits to the Supervisor and its Affiliates

     37   

The Consolidation

     40   

Principal Components of the Consolidation

     40   

What You Will Receive if Your Subject LLC is Included in the Consolidation

     53   

Why the Supervisor Believes the Consolidation is Fair to You

     55   

Appraisal

     57   

Fairness Opinion

     58   

Alternatives to the Consolidation

     58   

Comparison of Distributions

     60   

Voluntary Pro Rata Reimbursement Program for Expenses of Legal Proceedings with Former Property Manager and Leasing Agent

     61   

Allocation of Consideration in the Consolidation

     63   

Voting Procedures for the Consolidation Proposal and the Third-Party Portfolio Proposal

     68   
     Page  

No Right to Independent Appraisal

     70   

Consolidation Expenses

     70   

Conditions to the Consolidation

     70   

Your Right to Investor Lists and to Communicate with Other Participants

     71   

U.S. Federal Income Tax Considerations of the Consolidation Proposal

     71   

Qualification of the Company as a REIT

     72   

Selected Financial and Other Data

     73   

RISK FACTORS

     76   

Risk Factors Related to the Company and Risks Resulting from the Consolidation

     76   

Risks Related to a Third-Party Portfolio Transaction

     95   

Real Estate/Business Risks

     97   

Risks Related to the Tax Consequences of the Consolidation

     117   

FORWARD-LOOKING STATEMENTS

     124   

BACKGROUND OF AND REASONS FOR THE CONSOLIDATION

     126   

Background of the Subject LLCs

     126   

Investment Objectives of the Subject LLCs

     130   

Chronology of the Consolidation

     131   

The Supervisor’s Reasons for Proposing the Consolidation

     136   

Alternatives to the Consolidation

     141   

Comparison of Alternatives

     144   

Comparison of Distributions by the Subject LLCs and the Company

     147   

RECOMMENDATION AND FAIRNESS DETERMINATION

     149   

General

     149   

Material Factors Underlying Belief as to Fairness

     151   

Summary of Valuations

     153   

Relative Weight Assigned to Material Factors

     153   

CONSIDERATION

     154   

THE CONSOLIDATION

     156   

Principal Components of the Consolidation

     156   

Pre- and Post-Consolidation Structure

     160   

Conditions to the Consolidation

     171   

Pre-Closing Distributions

     171   
 

 

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Contribution Agreements

     172   

Other Consolidation Transaction Agreements

     173   

Lock-Up Agreements

     175   

Registration Rights Agreement

     176   

Option to Acquire Two Additional Properties

     177   

Pricing Committee

     178   

Description of the Tax Protection Agreement

     178   

Representation, Warranty and Indemnity Agreement

     180   

No Fractional Share of Common Stock

     180   

Effect of the Consolidation or a Third-Party Portfolio Transaction on Participants Who Vote Against the Consolidation or the Third-Party Portfolio Proposal

     180   

Effect of Consolidation on Subject LLCs not Acquired

     181   

Consolidation Expenses

     181   

Accounting Treatment

     182   

Subsequent Modifications to Offering Terms

     182   

Initial Public Offering

     182   

THIRD-PARTY PORTFOLIO PROPOSAL

     184   

VOLUNTARY PRO RATA REIMBURSEMENT PROGRAM FOR EXPENSES OF LEGAL PROCEEDINGS WITH FORMER PROPERTY MANAGER AND LEASING AGENT

     186   

REPORTS, OPINIONS AND APPRAISALS

     189   

General

     189   

Appraisal

     190   

Properties

     197   

Fairness Opinion

     199   

EXCHANGE VALUE AND ALLOCATION OF COMMON STOCK

     206   

Exchange Value Allocation of Common Stock

     206   

Derivation of Exchange Values

     207   

Appraised Value of the Management Companies

     208   

Allocation of Common Stock and Operating Partnership Units

     212   
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Allocation of Common Stock and Operating Partnership Units among the Subject LLCs, the Private Entities and the Management Companies

     213   

Allocation of Common Stock and Operating Partnership Units among the Participants and the Supervisor and the Malkin Holdings Group

     215   

Derivation of Consolidation Expenses

     220   

Estimated Exchange Value of Common Stock

     221   

CONFLICTS OF INTEREST

     226   

Supervisor

     226   

Substantial Benefits to the Supervisor and its Affiliates

     226   

Different Tax Consequences to Participants in Subject LLCs

     230   

Lack of Independent Representation of Participants

     230   

Terms of the Consolidation with the Other Subject LLCs, the Private Entities and the Management Companies

     230   

Non-Arm’s-Length Agreements

     231   

Conflicts of Interest in Voting Participation Interests

     231   

Features Discouraging Potential Takeovers

     231   

COMPARISON OF OWNERSHIP OF PARTICIPATION INTERESTS AND SHARES OF COMMON STOCK

     234   

Form of Organization and Purpose

     234   

Length and Type of Investment

     234   

Business and Property Diversification

     235   

Borrowing Policies

     235   

Other Investment Restrictions

     236   

Management Control

     237   

Fiduciary Duties

     238   

Management’s Liability and Indemnification

     239   

Takeover Provisions

     240   

Sale

     241   

Dissolution

     241   

Amendments

     241   

Review of Investor Lists

     242   

Nature of Investment

     243   

Additional Equity/Potential Dilution

     243   

Liability of Investors

     244   

Voting Rights

     244   

Liquidity

     245   

Expected Distributions and Payments

     246   
 

 

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Taxation of Taxable Investors

     246   

Taxation of Tax-Exempt Investors

     247   

Compensation and Fees

     248   

VOTING PROCEDURES FOR THE CONSOLIDATION PROPOSAL AND THE THIRD-PARTY PORTFOLIO PROPOSAL

     252   

Distribution of Solicitation Materials

     252   

Required Vote for the Consolidation Proposal and the Third-Party Portfolio Proposal and Other Conditions

     253   

CONSENT PROCEDURES FOR VOLUNTARY PRO RATA REIMBURSEMENT PROPOSAL

     256   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF EMPIRE STATE REALTY TRUST

     257   

Overview

     257   

Factors That May Influence Future Results of Operations

     262   

Critical Accounting Policies

     265   

Results of Operations

     277   

Liquidity and Capital Resources

     283   

Leverage Policies

     286   

Consolidated Indebtedness to be Outstanding After the IPO

     286   

Contractual Obligations

     290   

Off-Balance Sheet Arrangements

     290   

Distribution Policy

     290   

Cash Flows

     290   

Net Operating Income

     291   

Funds from Operations

     293   

EBITDA

     294   

Distribution to Equity Holders:

     294   

Inflation

     294   

Seasonality

     295   

Quantitative and Qualitative Disclosures About Market Risk

     295   

ECONOMIC AND MARKET OVERVIEW

     296   

New York Metropolitan Division Economy and Demographics

     296   

New York City Overview

     296   

Stamford Metropolitan Statistical Area Economy and Demographics

     300   

Office Markets

     302   

Westchester County

     312   

Fairfield County

     319   

Retail Markets

     324   

THE COMPANY BUSINESS AND PROPERTIES

     331   

Overview

     331   

History

     333   

The Company’s Competitive Strengths

     334   
     Page  

Business and Growth Strategies

     336   

Renovation and Repositioning Case Studies

     338   

The Company’s Portfolio Summary

     342   

Tenant Diversification

     345   

Lease Distribution

     346   

Lease Expirations

     347   

Tenant Improvement Costs and Leasing Commissions

     349   

Historical Capital Expenditures

     351   

Description of the Company’s Properties

     351   

Depreciation

     370   

Property Revenue and Operating Expenses

     370   

Description of Option Properties

     371   

Excluded Properties and Businesses

     372   

Leasing

     372   

Property Management

     373   

Construction Management

     373   

Regulation

     373   

Insurance

     376   

Competition

     377   

Employees

     377   

Offices

     377   

Legal Proceedings

     377   

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

     379   

Investment Policies

     379   

Dispositions

     380   

Financing Policies

     380   

Conflict of Interest Policies

     381   

Policies with Respect to Other Activities

     382   

Reporting Policies

     383   

CERTAIN PROVISIONS OF THE MARYLAND GENERAL CORPORATION LAW AND THE COMPANY’S CHARTER AND BYLAWS

     384   

The Company’s Board of Directors

     384   

Removal of Directors

     384   

Policy on Majority Voting

     384   

Business Combinations

     385   

Control Share Acquisitions

     385   

Subtitle 8

     386   

Meetings of Stockholders

     387   

Amendments to the Company’s Charter and Bylaws

     387   

Dissolution of the Company

     387   

Advance Notice of Director Nominations and New Business

     387   

Anti-Takeover Effect of Certain Provisions of Maryland Law and of the Company’s Charter and Bylaws

     388   
 

 

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Interested Director and Officer Transactions

     388   

Indemnification and Limitation of Directors’ and Officers’ Liability

     389   

REIT Qualification

     390   

DESCRIPTION OF THE PARTNERSHIP AGREEMENT OF THE OPERATING PARTNERSHIP

     391   

General

     391   

Management Liability and Indemnification

     391   

Fiduciary Responsibilities

     392   

LTIP Units

     392   

Distributions

     392   

Allocations of Net Income and Net Loss

     393   

Redemption Rights

     393   

Transferability of Operating Partnership Units; Extraordinary Transactions

     394   

Issuance of Common Stock and Additional Partnership Interests

     394   

Tax Matters

     395   

Term

     395   

Amendments to the Operating Partnership Agreement

     395   

BUSINESS OF THE SUBJECT LLCS

     397   

General

     397   

Investment Policies

     397   

Description of Properties

     398   

Financing

     411   

Competition

     413   

MANAGEMENT

     414   

The Company’s Directors, Director Nominees and Senior Management Team

     414   

Corporate Governance Profile

     416   

The Board’s Leadership Structure

     416   

The Board’s Role in Risk Oversight

     416   

Board Committees

     417   

Code of Business Conduct and Ethics

     418   

Director Compensation

     419   

Executive Compensation

     419   

Employment Agreement

     420   

401(k) Plan

     420   

Equity Incentive Plan

     421   

Limitation of Liability and Indemnification

     423   

Rule 10b5-1 Sales Plans

     424   

Compensation Committee Interlocks and Insider Participation

     424   
     Page  

PRINCIPAL STOCKHOLDERS OF THE COMPANY

     425   

RELATED PARTY TRANSACTIONS

     427   

Transactions Relating to the Consolidation

     427   

Tax Protection Agreement

     427   

Partnership Agreement

     428   

Registration Rights

     428   

Employment Agreement

     428   

Indemnification of the Company’s Directors and Officers

     428   

Option Agreements

     429   

Cash Amounts

     430   

Excluded Properties and Businesses

     430   

Reimbursement of Pre-Closing Transaction Costs

     431   

Repayment of Loan to Existing Entity

     431   

Releases of Guarantees

     431   

Grants Under the Company’s Equity Incentive Plan

     431   

FIDUCIARY RESPONSIBILITY

     433   

Directors and Officers of the Company

     433   

Supervisor of the Subject LLCs and Agent for Participants

     433   

DESCRIPTION OF CAPITAL STOCK

     434   

General

     434   

Shares of Common Stock

     434   

Power to Reclassify the Company’s Unissued Shares of Stock

     435   

Power to Increase or Decrease Authorized Shares of Common Stock and Issue Additional Shares of Common and Preferred Stock

     435   

Restrictions on Ownership and Transfer

     436   

Transfer Agent and Registrar

     439   

U.S. FEDERAL INCOME TAX CONSIDERATIONS

     440   

U.S. Federal Income Tax Consequences of the Consolidation

     441   

U.S. Federal Income Tax Consideration of the Voluntary Pro Rata Reimbursement Program for the Former Property Manager and Leasing Agent Legal Proceedings

     443   

U.S. Federal Income Tax Consequences of a Third-Party Portfolio Transaction

     444   

Taxation of the Company

     444   
 

 

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     Page  

Requirements for Qualification—General

     448   

Tax Aspects of Investments in Partnerships

     459   

Failure to Qualify

     461   

Taxation of Stockholders

     462   

EXPERTS

     470   

LEGAL MATTERS

     472   

WHERE YOU CAN FIND MORE INFORMATION

     473   
     Page  

INDEX TO FINANCIAL STATEMENTS

     F-1   

Appendix A—Fairness Opinion

     A-1   

Appendix B—Appraisal

     B-1   
 

 

EXPLANATORY NOTE: The information concerning the appraisal, or the Appraisal, by Duff & Phelps LLC, the independent valuer, contained in this Registration Statement on Form S-4 is based on the preliminary appraisal by the independent valuer as of July 1, 2011 and the information concerning the fairness opinion of Duff & Phelps LLC is based on the draft form of fairness opinion provided by the independent valuer. The Appraisal will be updated as of a date in closer proximity to the effective date of this Registration Statement on Form S-4, and the fairness opinion is expected to be delivered as of a date in closer proximity to such effective date.

 

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IMPORTANT NOTICE: The contents of this Prospectus/Consent Solicitation Statement were not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding U.S. federal income tax penalties that may be imposed on the taxpayer. The following was written to support the promotion or marketing of the transactions addressed by this prospectus/consent solicitation. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

The company uses market data and industry forecasts and projections throughout this Prospectus/Consent Solicitation Statement, and in particular in the section entitled “Business of the Subject LLCs.” The company has obtained substantially all of this information from a market study prepared for the company by Rosen Consulting Group, or RCG, a nationally recognized real estate consulting firm in January 2012. The company has paid RCG a fee for such services. Such information is included herein in reliance on RCG’s authority as an expert on such matters. See “Experts.” In addition, the company has obtained certain market data from publicly available information and industry publications. These sources generally state that the information they provide has been obtained from sources believed to be reliable. Forecasts are based on industry surveys and the preparer’s expertise in the industry and there is no assurance that any of the projected amounts will be achieved. The company believes this data others have compiled are reliable, but it has not independently verified this information. Any forecasts prepared by RCG are based on data (including third party data), models and experience of various professionals, and are based on various assumptions, all of which are subject to change without notice.

The term “greater New York metropolitan area” is used herein to refer only to Fairfield County, Connecticut and Westchester County, New York. The manner in which the company defines its property markets and submarkets differs from how RCG has done so in its market study included herein. Further, RCG’s definition of the New York metropolitan area differs from the company’s definition of the greater New York metropolitan area. RCG’s definition includes Putnam County and Rockland County in New York and Bergen County, Hudson County, and Passaic County in Northern New Jersey and excludes Fairfield County in Connecticut.

Unless the context otherwise requires or indicates, references in this Prospectus/Consent Solicitation Statement, which is referred to herein as the prospectus/consent solicitation, to:

 

  (i) the subject LLCs refers to Empire State Building Associates L.L.C., 60 East 42nd St. Associates L.L.C. and 250 West 57th St. Associates L.L.C.,

 

  (ii) the private entities refer to the privately-held entities supervised by the supervisor, which are all of the entities, other than the subject LLCs, listed in the chart under the section “Summary—The Subject LLCs, the Private Entities and the Management Companies,” which will be included in the consolidation,

 

  (iii)

the company refers to Empire State Realty Trust, Inc. (formerly known as Empire Realty Trust, Inc.), a Maryland corporation, together with its consolidated subsidiaries, including Empire State Realty OP, L.P. (formerly known as Empire Realty Trust, L.P.), a Delaware limited partnership, which is referred to herein as the operating partnership, after giving effect to the series of transactions involving the consolidation of the subject LLCs and the private entities described in this prospectus/consent solicitation that have consented to the consolidation and a combination of (a) Malkin Holdings LLC, a New York limited liability company that acts as the supervisor of, and performs various asset management services and routine administration with respect to, the subject LLCs and certain of the private entities (as discussed in this prospectus/consent solicitation), which is referred to herein as the supervisor; (b) Malkin Properties, L.L.C., a New York limited liability company that serves as the manager and leasing agent to certain of the private entities in Manhattan, (c) Malkin Properties of New York, L.L.C., a New York limited liability company that serves as the manager and leasing agent to certain of the private entities located in Westchester County, New York, (d) Malkin Properties of

 

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  Connecticut, Inc. a Connecticut corporation that serves as the manager and leasing agent to certain of the private entities in the State of Connecticut and (e) Malkin Construction Corp., a Connecticut corporation that is a general contractor and provides services to the private entities and third parties (including certain tenants at the properties owned by the private entities), which collectively are referred to herein as the management companies,

 

  (iv) the properties refers to the subject LLCs’ direct or indirect fee ownership interests in the Empire State Building, One Grand Central Place and 250 West 57th Street, respectively,

 

  (v) the properties of the company and the portfolio refer to the properties, the other assets of the subject LLCs, the ownership interests of the private entities in their properties and the other assets of the private entities,

 

  (vi) the agents refer to holders of the membership interests in the subject LLCs for the benefit of participants in the agent’s participating group; each of the agents is an affiliate of the supervisor,

 

  (vii) the participants refer to the holders of participation interests in the membership interests held by the agents and, as applicable, investors in the private entities,

 

  (viii) the participation interests refer to the beneficial ownership interests of participants in the membership interest of the subject LLCs held by an agent for the benefit of participants and, as applicable, membership or partnership interests or the beneficial interests therein held by investors in the private entities,

 

  (ix) common stock and shares of common stock refer to both shares of the company’s Class A common stock, par value $0.01, and Class B common stock, par value $0.01 per share, unless otherwise indicated,

 

  (x) the IPO refers to the initial public offering of the Class A common stock of the company, and IPO price refers to the price per share of Class A common stock in the IPO,

 

  (xi) operating partnership units refer to the operating partnership’s limited partnership interests, and

 

  (xii) organizational documents refer to the limited liability company agreement, the participating agreements and the terms of any voluntary capital transaction override program and voluntary pro rata reimbursement programs for each subject LLC, to the extent applicable.

All references to the enterprise value refer to the value of the company after completion of the consolidation determined in connection with the IPO by the company in consultation with the investment banking firms managing the IPO and prior to the issuance of Class A common stock in the IPO and any issuance of Class A common stock pursuant to equity incentive plans.

All references to the aggregate exchange value refer to the aggregate exchange value of the subject LLCs, the private entities and the management companies based on the appraisal, or the Appraisal, by Duff & Phelps, LLC, the independent valuer.

All references (other than information labeled as pro forma information, including the pro forma financial statements) to the number of shares of common stock, on a fully-diluted basis, issued in the consolidation refer to the number of shares of Class A common stock and Class B common stock issued or received in the consolidation, prior to the issuance of Class A common stock in the IPO and pursuant to any incentive plans, assuming that (i) the enterprise value in connection with the IPO equals the aggregate exchange value, (ii) the offering price per share in the IPO used herein which is used solely for illustrative purposes equals a hypothetical $10 per share, (iii) all of the subject LLCs, the private entities and the management companies participate in the consolidation, (iv) no cash is paid to participants in the subject LLCs, the private entities or the management companies in the consolidation, (v) no shares of Class A common stock are issued to the supervisor pursuant to the voluntary pro rata reimbursement program, (vi) no fractional shares are issued and

 

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(vii) all operating partnership units issued in the consolidation are redeemed on a one-for-one basis and all shares of Class B common stock issued in the consolidation are converted on a one-for one basis for shares of Class A common stock.

The enterprise value will be determined by the market conditions and the performance of the portfolio at the time of the IPO. The enterprise value may be higher or lower than the aggregate exchange value. The aggregate exchange value used herein is based on the Appraisal prepared by the independent valuer. Historically, in a typical initial public offering of a REIT, the enterprise value and initial public offering price are at a discount to the net asset value of the REIT’s portfolio of properties, which in turn may be above or below the aggregate exchange value. The enterprise value will equal the total number of shares of common stock and total number of operating partnership units issuable in the consolidation (excluding any shares of common stock issued in the IPO, and assuming all participants receive shares of common stock or operating partnership units and not cash) multiplied by the IPO price.

All references to distributions to participants assume that all amounts payable under the voluntary pro rata reimbursement program are paid out of cash distributions from the subject LLCs and the private entities, as applicable and that no shares of Class A common stock are issued to the supervisor for amounts due under the voluntary pro rata reimbursement program.

The supervisor has made certain of these assumptions to permit the presentation of information in tables in this prospectus/consent solicitation on a consistent basis. For example, while throughout this prospectus/consent solicitation the supervisor has assumed for purposes of this presentation of information that no cash is paid, cash will be paid to non-accredited investors in the private entities and to participants in the subject LLCs and to certain investors in the private entities that are charitable organizations and exempt from New York City real property transfer tax and elect to receive cash pursuant to the cash option described herein.

All references to the stockholders refer to the holders of Class A common stock and Class B common stock of the company.

All references to the Malkin Family refer to Anthony E. Malkin, Peter L. Malkin, each of their lineal descendants (including spouses of any of the foregoing), any estates of any of the foregoing, any trusts now or hereafter established for the benefit of any of the foregoing, or any corporation, partnership, limited liability company or other legal entity controlled by Anthony E. Malkin for the benefit of any of the foregoing.

All references to the Malkin Holdings group refer to the Malkin Family and Thomas N. Keltner, Jr., and his spouse.

All references to the Wien group refer to each of the lineal descendants of Lawrence A. Wien, including Peter L. Malkin and Anthony E. Malkin (including spouses of such descendants), any estates of any of the foregoing, any trusts now or hereafter established for the benefit of any of the foregoing, or any corporation, partnership, limited liability company or other legal entity controlled by Anthony E. Malkin for the benefit of any of the foregoing.

For demonstrative purposes, the supervisor has assigned a hypothetical IPO offering price of $10 per share. That value is strictly hypothetical and is for illustrative purposes only.

All references to the property and assets owned by the company upon completion of the consolidation refer to the company upon completion of the consolidation, without giving effect to the IPO, and assuming that all required supermajority consents of the participants in the subject LLCs have been obtained and all of the properties and assets to be acquired from the subject LLCs, the private entities and the management companies pursuant to the consolidation have been acquired.

 

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All references to a third-party portfolio transaction refer to the sale or contribution of the subject LLCs’ property interests and other assets as part of a sale or contribution of the properties owned by the subject LLCs and the private entities as a portfolio to a third party. The description of the company in this prospectus/consent solicitation assumes that all of the properties and assets to be acquired from the subject LLCs, the private entities and the management companies pursuant to the consolidation have been acquired by the company rather than a third party pursuant to a third-party portfolio transaction.

Certain terms and provisions of various agreements are summarized in this prospectus/consent solicitation. These summaries are qualified in their entirety by reference to the complete text of any such agreements, which are either attached as exhibits or appendices to this prospectus/consent solicitation or the supplement for your subject LLC in the form in which they are expected to be signed (but subject to change, including potentially significant changes, as described below) or filed as an exhibit to the Registration Statement on Form S-4 of which this prospectus/consent solicitation is a part. The parties to such agreements may make changes (including changes that may be deemed material) to the forms of the agreements attached as appendices or exhibits hereto, contained in the applicable supplement or filed as exhibits to the Registration Statement on Form S-4.

 

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QUESTIONS AND ANSWERS ABOUT

THE CONSOLIDATION

 

Q: What am I being asked to approve?

A: The supervisor, which is an affiliate of Peter L. Malkin and Anthony E. Malkin, is submitting the following proposals for your approval:

 

   

A consolidation of your subject LLC and certain office and retail properties in Manhattan and the greater New York metropolitan area owned by the subject LLCs and the private entities, all of which are supervised by the supervisor, and certain related management businesses, into the company, which is intended to qualify for taxation as a real estate investment trust for U.S. federal income tax purposes, which is referred to herein as a REIT.

 

   

As a potential alternative to the consolidation, the sale or contribution of the subject LLCs’ property interests as part of a sale or contribution of the properties owned by the subject LLCs and the private entities as a portfolio to a third party if the supervisor determines that the offer price includes what the supervisor believes is an adequate premium above the value that is expected to be realized over time from the consolidation and certain other conditions are met.

 

   

Voluntary pro rata reimbursement to the supervisor and Peter L. Malkin for the prior advances of all costs, plus interest, incurred in connection with litigations and arbitrations with the former property manager and leasing agent of the property.

Each of these proposals is subject to a separate consent, and approval of each proposal is not dependent on approval of any other proposal.

 

Q: Who is the supervisor?

A: The supervisor of the subject LLCs, Malkin Holdings LLC, provides all asset management services for, and supervises the operations of, the subject LLCs. Anthony E. Malkin and Peter L. Malkin are principals of the supervisor. The supervisor, which is related to the principals who formed the subject LLCs, was appointed as the supervisor of the subject LLCs pursuant to the original partnership agreement of each of the subject LLCs and is the only party which has performed, and is authorized to perform, this role under the subject LLCs’ organizational documents. The supervisor is controlled and managed by lineal descendants of the founder of the subject LLCs, Lawrence A. Wien. The subject LLCs were originally established as partnerships with no managing general partner or managing member and the supervisor is responsible for the operations and administrative functions on behalf of the subject LLCs. The supervisor, in its capacity as supervisor of each of the subject LLCs, provides and directs all administrative and oversight services. The supervisor also provides similar services to the private entities, including the private entities that hold operating lease interests in the properties owned by the subject LLCs.

 

Q: Why is the supervisor proposing the consolidation?

A: The supervisor believes this transaction represents the best opportunity for value enhancement for your investment in the subject LLC after years of action under the supervisor’s leadership to preserve, restore, and enhance your investment. Included in that history is a challenging time, which began with litigation commenced in 1997 by Peter L. Malkin and the supervisor to remove Helmsley-Spear, Inc., which is referred to herein as the former property manager and leasing agent (after it was sold by entities controlled by Leona M. Helmsley) as property manager and leasing agent of the properties owned by the subject LLCs and other properties which are now included in the plans for this consolidation.

Since the successful resolution of that litigation, the supervisor has overseen the engagement by the subject LLCs of independent property management and leasing agents and the transformation of the Empire State Building to a self management structure, retaining a third party agent for leasing only; developed and is in the process of effecting a comprehensive renovation and repositioning program for improving the physical

 

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condition of, and upgrading the credit quality of, tenants at the property, and raised the properties’ profile as part of a well regarded portfolio brand. The supervisor believes that it is an opportune time for the subject LLCs to take advantage of the opportunity to participate in the consolidation which will afford participants administrative and operating efficiencies, as well as better value protection through diversification. Additionally, the supervisor believes the consolidation provides value enhancement through better access to capital and options for liquidity for investors who so desire.

The supervisor has reviewed this transaction carefully and believes that current and anticipated property results provide favorable prospects for the consolidation. The supervisor will consider the capital market conditions at the time the IPO is ready to commence, but the supervisor is confident that a well located, well run, well capitalized portfolio of office and retail properties in Manhattan and in the greater New York metropolitan area is a desirable portfolio for an IPO. The consolidation and IPO will launch the company as a public company with its Class A common stock expected to be listed on the New York Stock Exchange, which is referred to herein as the NYSE, upon completion of the IPO.

The supervisor believes that the consolidation is the best way for participants to achieve liquidity and to maximize the value of their investment in the subject LLCs. The supervisor believes that benefits to participants from the consolidation include:

 

   

Liquidity for participants that elect to receive shares of Class A common stock expected to be listed on the NYSE, which investors may sell from time to time as and when they so desire (subject to the restrictions of applicable U.S. federal and state securities laws and after expiration of the lock-up period as described in this prospectus/consent solicitation). Presently there is no active trading market for the participation interest you hold in your subject LLC, which is only an indirect interest in real property subject to an operating lease, which is not under the operational control of your subject LLC;

 

   

Anticipated regular quarterly cash distributions on their shares of Class A common stock, which will include distributions of at least 90% of the company’s annual REIT taxable income (determined without regard to the deduction for dividends paid and excluding any net capital gains), which is required for REIT qualification as described below;

 

   

Conversion of the current governance structure which is inefficient and costly in general and in which participants do not share in the same economic benefit that they would receive through ownership and operation of the properties by a single entity into a modern, centralized and efficient governance structure;

 

   

The opportunity to continue to hold interests in an entity operating under the brand developed by the supervisor and to participate in any future growth of the company, while removing obstacles to obtaining true synergies and realization of value, such as combining financings, movements of tenants from one building to another, sharing of employees and management and oversight;

 

   

Anticipated value enhancement through operating and capital structure efficiencies and the benefit of property diversification;

 

   

The opportunity to continue to hold interests in an entity in which certain executives of the supervisor will be members of the senior management team and Anthony E. Malkin will be Chairman, Chief Executive Officer, President and a director of the company;

 

   

The governance structure of an SEC reporting company with its Class A common stock expected to be listed on the NYSE, which provides accountability through the oversight of the company by a board of directors consisting predominantly of independent directors and

 

   

Immediate liquidity for those participants that receive cash upon exercise of the cash option.

 

Q: Why is the company entering into the IPO?

A: The IPO is an integral part of the consolidation, the reasons for which are described in response to the immediately preceding question. The supervisor believes that the IPO will provide liquidity by exchanging shares of Class A common stock expected to be listed on the NYSE, which investors may sell from time to

 

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time as and when they so desire (subject to the restrictions of applicable U.S. federal and state securities laws and after expiration of the lock-up period as described in this prospectus/consent solicitation), for the current, illiquid interests held by participants. There is expected to be an active trading market in the Class A common stock as a result of the IPO. The supervisor also believes the consolidated entity will have access to additional sources of capital. The company intends to use the net proceeds from the IPO (i) to provide cash consideration in the consolidation to the non-accredited investors in the private entities and participants in the subject LLCs (excluding the Wien group) who elect to receive cash, (ii) to pay fees and other expenses of the consolidation and the IPO (including in connection with the assumption of indebtedness), (iii) to repay a loan made by investors in one of the private entities, including Anthony E. Malkin and Peter L. Malkin, to such private entity, (iv) to pay transfer taxes and other expenses and for general working capital purposes, and (v) with respect to the balance of the net proceeds, to provide cash consideration to the Helmsley estate and other charitable organizations.

 

Q: What is the proposed consolidation upon which I am being asked to vote?

A: You are being requested to approve the consolidation in which your subject LLC will contribute its assets to the operating partnership in exchange for Class A common stock of the company and/or cash. All of the subject LLCs together represent 41.5% of the aggregate exchange value. As part of the consolidation, the company also will enter into similar transactions with the other subject LLCs, private entities and the management companies described elsewhere in this prospectus/consent solicitation.

Through the consolidation, the company intends to combine the properties of the subject LLCs and the private entities and the assets and operations of the supervisor and the other management companies into the company, and intends to elect and to qualify as a REIT for U.S. federal income tax purposes commencing with its taxable year ending December 31, 2012. The closing of the consolidation will occur substantially simultaneously with the closing of the IPO. If the consolidation is approved by the three subject LLCs, the company acquires the properties from each of private entities and the company acquires the management companies, the company will own 12 office properties which, as of December 31, 2011, encompass approximately 7.7 million rentable square feet of office space, and which were approximately 79.6% leased as of December 31, 2011 (or 82.7% giving effect to leases signed but not yet commenced as of that date). Seven of these properties are located in the midtown Manhattan market and encompass in the aggregate approximately 5.9 million rentable square feet of office space, including the Empire State Building, the world’s most famous office building. The Manhattan office properties also contain an aggregate of 432,446 rentable square feet of premier retail space on the ground floor and/or lower levels. The remaining five office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing approximately 1.8 million rentable square feet in the aggregate. The majority of the square footage for these five properties is located in densely populated metropolitan communities with immediate access to mass transportation. Additionally, the company has entitled land at the Stamford Transportation Center in Stamford, Connecticut, adjacent to one of its office properties, that will support the development of an approximately 340,000 rentable square foot office building and garage. As of December 31, 2011, the portfolio also included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing 204,452 rentable square feet in the aggregate. As of December 31, 2011, the standalone retail properties were approximately 96.8% leased in the aggregate (or 99.0% giving effect to leases signed but not yet commenced as of that date).

The consolidation offers participants the opportunity to become stockholders of the company, which will have as senior management certain executives of the supervisor, a recognized operator of office and retail properties in Manhattan and the greater New York metropolitan area. The supervisor has a comprehensive knowledge of its markets that has been developed through the supervisor’s principals’ substantial experience. The consolidation also will result in the creation of a company with a board of directors consisting predominantly of independent directors, which will be responsible for overseeing the operations of the company. Anthony E. Malkin will be the only management member of the board of directors.

 

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All of the properties are located in Manhattan and the greater New York metropolitan area, which, according to RCG, is one of the most-prized office markets in the world and a world-renowned retail market due to a combination of supply constraints, high barriers to entry, near-term and long-term prospects for job creation, vacancy absorption and rental rate growth. The supervisor believes that the company will represent a unique opportunity to invest in a well-capitalized company with real estate in these most-prized markets and recognized and respected leadership. The company’s primary focus will be to continue to own, operate and manage its current portfolio and to acquire and reposition office and retail properties in Manhattan and the greater New York metropolitan area.

 

Q: Has the company received consents from the private entities and the management companies for the consolidation?

A: All required consents of the private entities and the management companies, including the consents of the Wien group and the interests of the estate of Leona M. Helmsley (which is referred to herein as the Helmsley estate), to the acquisition by the company of the assets of the private entities and the management companies have been obtained prior to the date of this prospectus/consent solicitation. In addition, the Wien group collectively owns participation interests in the subject LLCs and has advised that it will vote in favor of the consolidation and the third-party portfolio proposal. These participation interests held by the Wien group represent the following percentage ownership for each subject LLC: 8.5921% for Empire State Building Associates L.L.C., 8.7684% for 60 East 42nd St. Associates L.L.C. and 7.3148% for 250 West 57th St. Associates L.L.C. In addition to the participation interests, members of the Wien group hold override interests, which are non-voting. See “Background of and Reasons for the Consolidation—Background of the Subject LLCs.”

 

Q: What are the conditions for the consolidation to close?

A: The following conditions must be satisfied to consummate the consolidation of the subject LLC: (i) requisite consent of the participants in the subject LLC must have been received; (ii) the closing of the IPO and the listing of the Class A common stock on the NYSE or another national securities exchange; (iii) the closing of the consolidation no later than December 31, 2014; (iv) the participation of Empire State Building Associates L.L.C. and Empire State Building Company L.L.C., the private entity which owns an interest in the Empire State Building participating in the consolidation and (v) other customary conditions. The consolidation is not conditioned on any of the other subject LLCs or private entities participating in the consolidation.

 

Q: What will I be entitled to receive if I vote “FOR” the consolidation and either proposal is approved by my subject LLC?

A: If you vote “FOR” the consolidation and your subject LLC participates in the consolidation, you will receive shares of Class A common stock in exchange for the participation interest that you own in your subject LLC.

 

Q: What will I be entitled to receive if I don’t vote “FOR” the consolidation and either proposal is approved by my subject LLC?

A: If you vote “AGAINST” the consolidation, you do not vote or you “ABSTAIN,” and your subject LLC participates in the consolidation, if you are a participant in 250 West 57th St. Associates L.L.C., you will receive shares of Class A common stock, and, as set forth under the section entitled “Summary—Voting Procedures for the Consolidation Proposal and the Third-Party Portfolio Proposal,” if you are a participant in Empire State Building Associates L.L.C. and 60 East 42nd St. Associates L.L.C., your participation interests will be subject to a buyout pursuant to a buyout right included in the participating agreements since inception of the subject LLCs, even if the consolidation is not consummated. The buyout amount for your

 

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interest would be substantially lower than the exchange value. The buyout amount, which is equal to the original cost less capital repaid, but not less than $100, is currently $100 for the interest held by a participant in Empire State Building Associates L.L.C. and $100 for the interest held by a participant in 60 East 42nd St. Associates L.L.C., as compared to the exchange value of $33,085 (or $36,650 if you are not subject to the voluntary capital override) per $1,000 original investment for Empire State Building Associates L.L.C. and $38,972 per $1,000 original investment for 60 East 42nd St. Associates L.L.C., respectively. Prior to an agent purchasing the participation interests of non-consenting participants for the benefit of the applicable subject LLC, the agent will give such participants not less than ten days’ notice after the required supermajority consent is received by a subject LLC to permit them to consent to the consolidation or the third-party portfolio proposal, as applicable, in which case their participation interests will not be purchased.

 

Q: If my subject LLC consolidates with the company, may I choose to receive something other than shares of Class A common stock?

A: Yes, each participant in a subject LLC may elect to receive cash consideration in lieu of a portion of the Class A common stock otherwise issuable in the consolidation (at a price per share equal to the IPO price reduced by the underwriting discount per share paid by the company in the IPO), if the consolidation is approved and consummated by such subject LLC, provided that the aggregate cash consideration paid to participants in such subject LLC will not exceed [12-15%] of the aggregate consideration payable to all participants in such subject LLC (excluding the Wien group). The Wien group will not receive cash consideration in the consolidation at the time of the IPO and will therefore not be entitled to make any such cash election. Thus, if any participant does not make a cash election or makes a cash election for less than [12-15%] of the consideration payable to such participant in respect of such subject LLC, the excess will be allocated among the other electing participants in such subject LLC in proportion to their participation interests to the extent they elect to receive additional cash consideration. This election is referred to herein as the cash option. Such [12-15%] limit on the cash elections in a subject LLC is designed to assist the company in meeting the conditions for obtaining a reduced rate of transfer tax in New York City and New York State for transfers to qualifying REITs. The supervisor believes such reduction may be partially available for property transfers to the operating partnership as part of the consolidation. The cash election, together with the ability to sell shares of Class A common stock (as discussed in the response to the next question), based upon a sale at or above the IPO price, is intended to provide a participant who is a U.S. individual with the ability to obtain an amount of cash sufficient to pay his or her U.S. federal, state, and local income taxes.

 

Q: When can I first sell shares of Class A common stock of the company after the consolidation and the IPO?

A: After the consolidation and the IPO, each participant (except the Malkin Family) will have the ability to sell up to half of the balance of such participant’s consideration (i.e., 50% of the Class A common stock received in the consolidation after the cash election) at any time after the 180th day following the IPO pricing date; provided that if the IPO occurs on or before December 31, 2012, each such participant in the subject LLCs (except the Helmsley estate) instead will have an earlier ability to sell up to between 19.5% (if the cash election limit is 12%) and 17% (if the cash election limit is 15%) of such Class A common stock received in the consolidation on or after April 1, 2013 to provide liquidity for income tax payments due on April 15, 2013 and an additional 30.5%-33% (resulting in an aggregate of 50%) of such Class A common stock received in the consolidation on or after such 180th day.

 

Q: How was the value of my participation interest determined?

A: The value of your participation interest, as described in this prospectus/consent solicitation, was determined based on the exchange value for your subject LLC. The exchange value of your subject LLC and the other subject LLCs, the private entities and the management companies is the value of each of and all these entities based on the Appraisal by Duff & Phelps, LLC, which is referred to herein as Duff & Phelps

 

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or the independent valuer, which serves as the independent valuer for all the subject LLCs, the private entities and the management companies. Shares of common stock, operating partnership units and/or cash, as applicable, will be allocated among the subject LLCs, the private entities and the management companies based upon the exchange values of each subject LLC, each private entity and the management companies. The exchange value was then allocated among the participants and the holders of the override interests by the independent valuer in accordance with each subject LLC’s organizational documents. However, as described elsewhere in this prospectus/consent solicitation, while the exchange value was used to establish the relative value of the properties and participation interests, this value does not necessarily represent the fair market value of your participation interest.

The fair market value of the consideration that you receive will not be known until the pricing of the IPO. The value of the consideration will be based on the enterprise value determined in connection with pricing of the IPO. The enterprise value will be determined by the market conditions and the performance of the portfolio at the time of the IPO. The enterprise value may be higher or lower than the aggregate exchange value. The exchange value used herein is based on the Appraisal prepared by the independent valuer. Historically, in a typical initial public offering of a REIT, the enterprise value and initial public offering price are at a discount to the net asset value of the REIT’s portfolio of properties, which in turn may be above or below the aggregate exchange value.

 

Q: How many shares of Class A common stock will I be entitled to receive if my subject LLC is consolidated with the company?

A: The number of shares of Class A common stock that will be allocated to each subject LLC in the consolidation based on the exchange value is set forth in the chart under the caption “Summary—The Consolidation—Allocation of Common Stock.” You will receive a portion of the Class A common stock allocated to your subject LLC in accordance with your percentage interest in the subject LLC and the subject LLC’s organizational documents, after taking into account the allocations in respect of the supervisor’s override interests. The number of shares of Class A common stock presented in this prospectus/consent solicitation is based on the hypothetical $10 per share exchange value arbitrarily assigned by the supervisor to illustrate the number of shares of Class A common stock that a participant would receive if the enterprise value of the company determined in connection with the IPO were the same as the aggregate exchange value and the IPO price were $10 per share. The actual number of shares of common stock, on a fully-diluted basis, issued in the consolidation will equal the enterprise value divided by the actual IPO price upon pricing of the IPO. The enterprise value will be determined by the market conditions and the performance of the portfolio at the time of the IPO. The enterprise value may be higher or lower than the aggregate exchange value. The exchange value used herein is based on the Appraisal prepared by the independent valuer. Historically, in a typical initial public offering of a REIT, the enterprise value and initial public offering price are at a discount to the net asset value of the REIT’s portfolio of properties, which in turn may be above or below the aggregate exchange value.

 

Q: What are the rights of holders of Class A common stock and Class B common stock?

A: Each share of Class A common stock entitles the holder to one vote. Operating partnership units have economic rights similar to the Class A common stock but do not have the right to vote on matters presented to holders of Class A common stock and Class B common stock. Accredited investors in the private entities and the management companies which had an option to elect operating partnership units at the time they made their election of consideration in the private solicitation had an option to elect to receive one share of Class B common stock instead of one operating partnership unit for every 50 operating partnership units such participant would otherwise receive in the consolidation. The Class B common stock provides its holder with a voting right that is no greater than if such holder had received solely Class A common stock in the consolidation. Each outstanding share of Class B common stock entitles the holder to 50 votes on all matters on which the stockholders of Class A common stock are entitled to vote, including the election of directors, and holders of shares of Class A common stock and Class B common stock will vote together as a

 

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single class. Each share of Class B common stock has the same economic interest as a share of Class A common stock, and one share of Class B common stock and 49 operating partnership units together represent a similar economic value as 50 shares of Class A common stock. One share of Class B common stock may be converted into one share of Class A common stock at any time, and one share of Class B common stock is subject to automatic conversion into one share of Class A common stock upon a direct or indirect transfer of such share of Class B common stock or certain transfers of the operating partnership units held by the holder of Class B common stock (or a qualified transferee) to a person other than a qualified transferee.

 

Q: Why am I being asked to consent to a third-party portfolio proposal?

A: As a potential alternative to the consolidation, you also are being asked to consent to the sale or contribution of the subject LLC’s property interest as part of a sale or contribution of the properties owned by the subject LLCs and the private entities as a portfolio to a third party. Through solicitation of consents, for the first time the properties owned by the subject LLCs and the private entities can be joined as a single portfolio. While the supervisor believes the consolidation and IPO represent the best opportunity for participants in the subject LLCs and the private entities to achieve liquidity and to maximize the value of their respective investments, the supervisor also believes it is in the best interest of all participants for the supervisor to be able to approve offers from unaffiliated third parties for the portfolio as a whole.

Market forces are dynamic, unpredictable, and subject to volatility. Should the public awareness of the proposed consolidation and IPO produce potential compelling offers from unaffiliated third parties to purchase the consolidated portfolio, it will be costly and time consuming to solicit consents to allow a sale or contribution of the portfolio to a third party, and there is considerable risk that any opportunity which might appear would be lost without the requested consent in place. Therefore, the supervisor believes that it is advisable to have the flexibility and discretion, subject to certain conditions, to accept an offer for the entire portfolio of properties from an unaffiliated third party, rather than pursue the consolidation and IPO, if the supervisor determines the offer price includes what the supervisor believes is an adequate premium above the value that is expected to be realized over time from the consolidation. The supervisor has agreed that it will not accept a third-party offer unless it is unanimously approved by a committee which will include representatives of the supervisor and a representative of the Helmsley estate. Any third-party interested in making a portfolio proposal will be instructed to make its offer for all cash. It is possible that participants or the supervisor and its affiliates may be offered an option to receive securities in lieu of all or a portion of the cash. The supervisor will be authorized to approve offers only if definitive agreements are entered into prior to December 31, 2015 or such earlier date as the supervisor may set with or without notice or public announcement.

 

Q: What will I be entitled to receive if I don’t vote “FOR” the third-party portfolio proposal and it is approved by my subject LLC?

A: If you vote “AGAINST” the third-party portfolio proposal, you do not vote or you “ABSTAIN,” and your subject LLC participates in the third-party portfolio proposal, if you are a participant in 250 West 57th St. Associates L.L.C. you will receive the same consideration as other participants and, as set forth under the section entitled “Summary—Voting Procedures for the Consolidation Proposal and the Third-Party Portfolio Proposal,” if you are a participant in Empire State Building Associates L.L.C. and 60 East 42nd St. Associates L.L.C., your participation interests will be subject to a buyout pursuant to a buyout right included in the participating agreements since inception of the subject LLCs. The buyout amount for your interest would be substantially lower than the exchange value in connection with the allocation of consideration in the consolidation. The buyout amount, which is equal to the original cost less capital repaid, but not less than $100, is currently $100 for the interest held by a participant in Empire State Building Associates L.L.C. and $100 for the interest held by a participant in 60 East 42nd St. Associates L.L.C., as compared to the exchange value of $33,085 (or $36,650 if you are not subject to the voluntary capital override) per $1,000 original investment for Empire State Building Associates L.L.C. and $38,972 per $1,000 original investment

 

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for 60 East 42nd St. Associates L.L.C., respectively. Prior to an agent purchasing the participation interests of non-consenting participants for the benefit of the applicable subject LLC, the agent will give such participants not less than ten days’ notice after the required supermajority consent is received by a subject LLC to permit them to consent to the consolidation or the third-party portfolio proposal, as applicable, in which case their participation interests will not be purchased. Unanimity on the consents is required pursuant to the organizational documents of Empire State Building Associates L.L.C. and 60 East 42nd St. Associates L.L.C. with respect to both the consolidation and the third-party portfolio proposal; therefore, a participant in either of such subject LLCs who does not vote in favor of either the consolidation or third-party portfolio transaction proposal (and does not change his or her vote after notice that the requisite supermajority consent has been obtained) will be subject to this buyout regardless of whether either or neither transaction is consummated.

 

Q: Why am I being asked to consent to a voluntary pro rata reimbursement program?

A: You are being asked to consent to a voluntary pro rata reimbursement program pursuant to which the supervisor and Peter L. Malkin, a principal of the supervisor, will be reimbursed for the prior advances of all costs, plus interest, incurred in connection with the legal proceedings with Helmsley-Spear, Inc., the former property manager and leasing agent, which resulted in the removal of the former property manager and leasing agent as property manager and leasing agent of the properties owned by the subject LLCs and certain of the private entities and has enabled a renovation and repositioning turnaround program to be implemented by the supervisor. If you consent to the voluntary pro rata reimbursement program, the supervisor and Peter L. Malkin will be reimbursed for your pro rata share of costs, plus interest, previously incurred out of your share of the excess cash of your subject LLC that is being distributed to participants, and, to the extent that is insufficient, the shares of Class A common stock that you would receive in the consolidation or the consideration that you would receive in a third-party portfolio transaction, as applicable, will be reduced by the balance (valued, if the consolidation is consummated, at the IPO price) and such balance would be paid to the supervisor and Peter L. Malkin in shares of Class A common stock, if the consolidation is consummated, or out of distributions that you would receive from the proceeds of a third-party portfolio transaction, if consummated, or out of distributions from operations of the subject LLC.

The table below shows the amount to be received by the supervisor out of the distributions of each consenting participant for each $1,000 of original investment by a participant pursuant to the voluntary pro rata reimbursement program:

 

     Exchange Value of Shares of
Common Stock to be
Received by Participants per
$1,000 Original Investment
    Voluntary Reimbursement  
       Per $1,000
Original
Investment(2)
     Total  

Empire State Building Associates L.L.C.

   $ 33,085 (1)    $ 101       $ 3,341,533   

60 East 42nd St. Associates L.L.C.

   $ 38,972      $ 237       $ 1,659,613   

250 West 57th St. Associates L.L.C.

   $ 35,722 (1)    $ 205       $ 736,506   

 

(1)

Represents exchange value for participants subject to the voluntary override program. Participants in Empire State Building Associates L.L.C. not subject to the voluntary override program will receive an exchange value of shares of Class A common stock per $1,000 original investment of $36,650, and participants in 250 West 57th St. Associates L.L.C. not subject to the voluntary override program will receive an exchange value of shares of Class A common stock per $1,000 original investment of $39,468.

(2) Empire State Building Associates L.L.C.’s, 60 East 42nd St. Associates L.L.C.’s and 250 West 57th St. Associates L.L.C.’s share of the aggregate voluntary reimbursement (before any reimbursements) is $3,150,896, $1,564,930, and $694,487, respectively, plus interest. The amount shown in the table includes accrued interest through December 31, 2011 and does not include interest which will accrue subsequent to December 31, 2011.

The Helmsley estate, as part of an agreement with the supervisor covering this and other matters, has paid the voluntary pro rata reimbursement to the supervisor for its pro rata share of costs advanced, plus interest, which totaled $5,021,048.

 

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To consent to this proposal, simply indicate on the enclosed consent form that you want to consent to this proposal, then sign and mail it in the enclosed return envelope as soon as possible. If you “CONSENT” to the voluntary pro rata reimbursement program, your consent is made only with respect to your participation interest, and your participation in the program is not dependent on the consent of any other participant. If you sign and send in your consent form and do not indicate that you want to consent, you will be counted as “NOT” consenting to this proposal. If you indicate on your consent form that you “ABSTAIN,” you will be counted as “NOT” consenting to this proposal.

 

Q: What is a REIT, and why will the company elect to be a REIT?

A: A REIT is an entity that has elected and qualifies to be taxed as a “real estate investment trust” under the Internal Revenue Code of 1986, as amended, referred to herein as the Code. A REIT is subject to requirements under the Code related to, among other things, the nature of its income and the composition of its assets, the amount of its annual distributions, and the diversity of its stock ownership. The primary benefit of REIT qualification is that a REIT is generally entitled to a deduction for dividends that it pays and, therefore, is not subject to U.S. federal corporate income tax on its net income distributed to its stockholders if it distributes its net taxable income to its stockholders on an annual basis. Therefore, upon a distribution of dividends by the company to its stockholders, income generated by the company will be taxed only at the stockholder-level. By contrast, a non-REIT “C” corporation is subject to U.S. federal corporate income tax on its taxable income without regard to dividends paid, and its stockholders are subject to U.S. federal income tax on dividends received.

 

Q: What is the operating partnership?

A: The structure of the company generally is referred to as an “UPREIT” structure. Substantially all of the company’s assets will be held directly or indirectly by the operating partnership. Holders of operating partnership units will have the same rights to distributions as stockholders. This structure generally will enable the company to acquire assets in transactions that will not trigger the recognition of gain to the owners of the acquired assets, assuming certain conditions are met.

The company will be the sole general partner of the operating partnership. As the sole general partner of the operating partnership, the company generally has the exclusive power under the operating partnership agreement to manage and conduct the business of the operating partnership, without the consent of the holders of operating partnership units or the stockholders.

The operating partnership units will be owned by the company and by any person who transfers interests or assets to the operating partnership or one of its subsidiaries in exchange for operating partnership units, including participants in the private entities and the Malkin Holdings group that will be issued operating partnership units as part of the consolidation in exchange for their participation interests and override interests in the private entities and the subject LLCs and their interests in certain of the management companies, as applicable. The company will own one operating partnership unit for each outstanding share of common stock.

 

Q: What is the scope of the public U.S. REIT market?

A: According to the National Association of Real Estate Investment Trusts, as of December 31, 2011, there were approximately 143 REITs in the U.S. that trade on one of the major stock exchanges, with 134 trading on the NYSE. Total equity market capitalization was approximately $464 billion.

 

Q: Who can vote on the consolidation and third-party portfolio proposal?

A: Participants in each subject LLC who hold participation interests in such subject LLC during the consent solicitation period are entitled to vote “FOR” or “AGAINST” each of the proposed consolidation and the

 

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third-party portfolio proposal with respect to such subject LLC. In the event of a transfer of a participation interest that previously has been voted, that vote will remain in effect unless revoked by the transferee.

The Wien group collectively owns participation interests in the subject LLCs and has advised that it will vote in favor of the consolidation and the third-party portfolio proposal. These participation interests represent the following percentage ownership for each subject LLC: 8.5921% for Empire State Building Associates L.L.C., 8.7684% for 60 East 42nd St. Associates L.L.C. and 7.3148% for 250 West 57th St. Associates L.L.C. In addition to the participation interests, members of the Wien group hold override interests which are non-voting. See “Background of and Reasons for the Consolidation—Background of the Subject LLCs.”

 

Q: How do I vote “FOR” the consolidation and the third-party portfolio proposal?

A: Simply indicate on the enclosed consent form how you want to vote for each proposal, then sign and mail it in the enclosed return envelope as soon as possible so that your participation interest may be voted “FOR” or “AGAINST” each proposal. If you sign and send in your consent form and do not indicate how you want to vote on either one of these proposals, your consent will be counted as a vote “FOR” such proposal. If you do not submit your consent form or you indicate on your consent form that you “ABSTAIN” from either proposal, it will have the effect of voting “AGAINST” such proposal. If you vote “FOR” the consolidation and your subject LLC participates in the consolidation, you effectively will preclude other alternatives, other than a third-party portfolio transaction, unless you vote “AGAINST” the third-party portfolio proposal. These alternatives include continuation of your subject LLC and a sale of your subject LLC’s interest in the property and the resulting distribution of the net proceeds to its participants. Each of these proposals is subject to a separate consent and approval of each proposal is not dependent on approval of any other proposal.

 

Q: Can I change my vote on the consolidation proposal or the third-party portfolio proposal after I mail my consent form?

A: Yes. You can change your vote on the consolidation proposal, the third-party portfolio proposal, or both, at any time before the later of the date that consents from participants holding the required percentage interests are received by your subject LLC and the 60th day after the date of this prospectus/consent solicitation. In addition, participants in Empire State Building Associates L.L.C. and 60 East 42nd St. Associates L.L.C. that voted against the consolidation proposal, the third-party portfolio proposal, or both, or abstained from either or both of those proposals, will be notified and may change their vote within ten days of receiving notice that the subject LLC has received consents from participants holding the required percentage interests. The required percentage interests for Empire State Building Associates L.L.C. is 80% of the outstanding participation interests in each of the three participating groups, for 60 East 42nd St. Associates L.L.C. is 90% of the outstanding participation interests in each of the seven participating groups and for 250 West 57th St. Associates L.L.C. is 75% of the outstanding participation interests in eight out of the ten participating groups. You can change your vote in one of two ways: you can send us a written statement that you would like to change your vote, or you can send us a new consent form. Any change in your vote or new consent form should be sent to MacKenzie Partners, Inc., the vote tabulator.

 

Q: Are there any tax consequences as a result of the consolidation?

A: You will generally recognize gain or loss for U.S. federal income tax purposes with respect to your participation interest equal to the amount by which the sum of any cash and the value of any shares of Class A common stock you receive in connection with the consolidation, plus the amount of liabilities allocable to your participation interest, exceeds your tax basis in your participation interest. You will recognize “phantom income” (i.e., income in excess of any cash and the value of any shares of common stock you receive) if you have a “negative capital account” with respect to your participation interest. The supervisor urges you to consult with your tax advisor to evaluate the tax consequences to you in your particular circumstances as a result of the consolidation.

 

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Q: Will I be able to transfer the shares of Class A common stock I receive in the consolidation?

A: As stockholders, participants will own Class A common stock which is expected to be listed on the NYSE, and therefore will be publicly valued and freely tradable. Participants will be able to achieve liquidity by selling all or part of the shares of Class A common stock (subject to the restrictions of applicable U.S. federal and state securities laws and after expiration of the lock-up period as described herein).

 

Q: In addition to this prospectus/consent solicitation, I received a supplement. What is the difference between this prospectus/consent solicitation and the supplement?

A: The purpose of this prospectus/consent solicitation is to describe the consolidation generally and to provide you with a summary of the investment considerations generally applicable to all of the subject LLCs. The purpose of the supplement is to describe the investment considerations particular to your subject LLC.

After you read this prospectus/consent solicitation, the supervisor urges you to read the supplement. The supplement contains information particular to your subject LLC. This information is material in your decision whether to vote “FOR” or “AGAINST” the consolidation.

 

Q: When do you expect the consolidation to be completed?

A: The company plans to complete the consolidation as soon as possible after the receipt of the approval by the required vote of your subject LLC’s participants and the approval by the required vote of the other subject LLCs’ participants, conditioned on the closing of the IPO. The company is unable to estimate the closing date of the consolidation and has required that it be completed no later than December 31, 2014. Your consent form must be received by             , 2012, unless the supervisor extends the solicitation period. The supervisor reserves the right to extend on one or more occasions the solicitation period for one or more proposals for one or more subject LLCs without extending for other proposals or subject LLCs whether or not it has received approval for the consolidation or the third-party portfolio proposal.

 

Q: If I own participation interests in more than one subject LLC, what should I do?

A: For each subject LLC in which you own a participation interest, in the same mailing in which you received this prospectus/consent solicitation you have received a transmittal letter, supplement and consent form which provides for vote with respect to the consolidation proposal and the third-party portfolio proposal. Regardless of how many subject LLCs in which you own a participation interest, you have received a single copy of the prospectus/consent solicitation. Participants in each subject LLC will vote separately on whether or not to approve the consolidation. Accordingly, if you hold participation interests in more than one subject LLC, you must complete one consent form for each subject LLC in which you are a participant.

 

Q: Information in this prospectus/consent solicitation is based on a $1,000 original investment. Where can I find information about my actual original investment?

A: Information is presented in this prospectus/consent solicitation based on a $1,000 original investment to allow participants to determine the effect on them individually. Information regarding the amount of your actual original investment will be provided on the consent form sent to you.

 

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WHO CAN HELP ANSWER YOUR QUESTIONS?

If you have more questions about the consolidation or would like additional copies of the prospectus/consent solicitation or the supplement relating to your subject LLC(s) (which will be provided at no cost), you should contact the person designated on the consent form sent to you.

 

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SUMMARY

This summary highlights information contained elsewhere in this prospectus/consent solicitation and may not contain all of the information regarding the consolidation that is important to you. To understand the consolidation and the third-party portfolio proposal fully and for a more complete description of the terms of and risks related to the consolidation and the third-party portfolio proposal, you should read carefully this entire prospectus/consent solicitation, the accompanying supplement relating to your subject LLC, the accompanying transmittal letter and the other documents to which the supervisor or the company, as applicable, has referred you, including the appendices and documents incorporated into this prospectus/consent solicitation by reference. See “Where You Can Find More Information.”

Purpose of this Prospectus/Consent Solicitation

You are being requested to approve the consolidation in which your subject LLC will contribute its assets to the company as part of the consolidation in exchange for Class A common stock of the company and/or cash. As part of the consolidation, the company also will enter into similar transactions with the other subject LLCs, the private entities and with the supervisor and other management companies that provide services to the subject LLCs and these entities. The company will be led by its Chairman, Chief Executive Officer and President, Anthony E. Malkin, who has provided portfolio leadership as president of the supervisor, while Peter L. Malkin will continue to provide guidance as Chairman Emeritus, all supported by the supervisor’s team of executives and staff, who are expected to join the company as part of the consolidation. The consolidation also will result in the creation of a company with a board of directors consisting predominantly of independent directors, which will be responsible for overseeing the operations of the company. Anthony E. Malkin will be the only management member of the board of directors.

The supervisor believes you will benefit from this consolidation through newly created opportunities for liquidity, enhanced operating and financing abilities and efficiencies, combined balance sheets, increased growth opportunities, enhanced property diversification, and continued leadership by the principals of the supervisor under the accountability of the governance structure of a company with its Class A common stock expected to be listed on the New York Stock Exchange, which is referred to herein as the NYSE, and a board of directors consisting predominantly of independent directors.

The supervisor believes this transaction represents the best opportunity for value enhancement for your investment in the subject LLC after years of action under the supervisor’s leadership to preserve, restore, and enhance your investment. Included in that history is a challenging time, which began with litigation commenced in 1997 by Peter L. Malkin and the supervisor to remove Helmsley-Spear, Inc., the former property manager and leasing agent (after it was sold by entities controlled by Leona M. Helmsley), as property manager and leasing agent of the properties owned by the subject LLCs and other properties, which are now included in the plans for this consolidation.

Since the successful resolution of that litigation, the supervisor has overseen the engagement by the subject LLCs of independent property management and leasing agents, developed and substantially effected a comprehensive renovation and repositioning program for improving the physical condition of and upgrading the credit quality of tenants at the property, and raised the property’s profile as part of a well regarded portfolio brand. The supervisor believes that it is an opportune time for the subject LLCs to take advantage of the opportunity to participate in the consolidation which will afford participants the administrative and operating efficiencies, as well as better value protection through diversification. Additionally, the supervisor believes the consolidation provides value enhancement through better access to capital and liquidity for investors who so desire.

 

 

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The supervisor has reviewed this transaction carefully and believes that current and anticipated property results provide favorable prospects for the consolidation. The supervisor will consider the capital market conditions at the time the IPO is ready to commence, but the supervisor is confident that a well located, well run, well capitalized portfolio of office and retail properties in Manhattan and in the greater New York metropolitan area is a desirable portfolio for an IPO.

The consolidation offers participants the opportunity to become stockholders of the company, which is being formed to continue and expand the commercial real estate business of the subject LLCs, the private entities and the management companies participating in the consolidation. The supervisor has developed a comprehensive knowledge of its markets that has been acquired through its senior management team’s substantial experience and is a recognized operator of office and retail properties.

Manhattan and the greater New York metropolitan area is one of the most-prized office markets in the world and a world-renowned retail market. Its status is derived from a combination of supply constraints and high barriers to entry, as well as near-term and long-term prospects for job creation, vacancy absorption and rental rate growth. Upon completion of the consolidation, all of the company’s properties will be located in Manhattan and the greater New York metropolitan area. The supervisor believes that the company will represent a unique opportunity to invest in a well-capitalized company with real estate in these most-prized markets and recognized and respected leadership. The company’s primary focus will be to manage its current portfolio and acquire and reposition office and retail properties in Manhattan and the greater New York metropolitan area.

A subject LLC will participate in the consolidation only if participants holding more than the required percentage of the outstanding participation interests in the subject LLC vote in favor of the consolidation, as described herein.

Description of the Company and the Subject LLCs

Overview

The company is a self-administered and self-managed real estate investment trust, or REIT, that owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area. The company was formed to continue and expand the commercial real estate business of the supervisor and its affiliates. The company’s primary focus will be to continue to own, manage and operate its current portfolio and to acquire and reposition office and retail properties in Manhattan and the greater New York metropolitan area.

As of December 31, 2011, the company owned 12 office properties encompassing approximately 7.7 million rentable square feet of office space, which were approximately 79.6% leased (or 82.7% giving effect to leases signed but not yet commenced as of that date). Seven of these properties are located in the midtown Manhattan market and encompass in the aggregate approximately 5.9 million rentable square feet of office space, including the Empire State Building, the world’s most famous office building. The company’s Manhattan office properties also contain an aggregate of 432,446 rentable square feet of premier retail space on their ground floor and/or lower levels. The company’s remaining five office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing in the aggregate approximately 1.8 million rentable square feet. The majority of square footage for these five properties is located in densely populated metropolitan communities with immediate access to mass transportation. Additionally, the company has entitled land at the Stamford Transportation Center in Stamford, Connecticut, adjacent to one of its office properties, that will support the development of an approximately 340,000 rentable square foot office building and garage, which is referred to herein as Metro Tower. As of December 31 2011, the company’s portfolio also included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of

 

 

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Westport, Connecticut, encompassing 204,452 rentable square feet in the aggregate. As of December 31, 2011, the company’s standalone retail properties were approximately 96.8% leased in the aggregate (or 99.0% giving effect to leases signed but not yet commenced as of that date).

In addition, the company has an option to acquire from three private entities supervised by the supervisor two additional Manhattan office properties encompassing approximately 1.5 million rentable square feet of office space and 153,298 rentable square feet of ground floor retail space. Each of the Malkin Holdings group and the Helmsley estate owns interests in such private entities. These option properties currently are subject to ongoing litigation and the company has an option to acquire fee, long-term leasehold, sub-leasehold and/or sub-subleasehold interests in these two properties, as applicable, after such litigation is resolved. These properties are referred to herein as the option properties. For more information please see “The Company Business and Properties—Description of Option Properties.

From 2002 through 2006, the supervisor gradually gained day-to-day management of the company’s Manhattan office properties. Since then, the supervisor has been undertaking a comprehensive renovation and repositioning strategy of its Manhattan office properties that has included the physical improvement through upgrades and modernization of, and tenant upgrades in, such properties. Since the supervisor assumed day-to-day management of the company’s Manhattan office properties beginning with One Grand Central Place in 2002 and through December 31, 2011, the subject LLCs and the private entities have invested a total of approximately $306.8 million (excluding tenant improvement costs and leasing commissions) in its Manhattan office properties pursuant to this program. The company currently intends to invest between $170.0 million and $210.0 million of additional capital through the end of 2013. The company expects to complete substantially this program by the end of 2013, except with respect to the Empire State Building, which is the last Manhattan office property that began its renovation program. In addition, the company currently estimates that between $60.0 million and $70.0 million of capital is needed beyond 2013 to complete the renovation program at the Empire State Building, which the company expects to complete substantially in 2016, due to the size and scope of the company’s remaining work and the company’s desire to minimize tenant disruptions at the property. The company intends to fund these capital improvements through a combination of operating cash flow and borrowings.

These improvements, within the renovation and repositioning program, include restored, renovated and upgraded or new lobbies; elevator modernization; renovated public areas and bathrooms; refurbished or new windows; upgrade and standardization of retail storefront and signage; façade restorations; modernization of building-wide systems and enhanced tenant amenities. These improvements are designed to improve the overall value and attractiveness of the company’s properties and have contributed significantly to its tenant repositioning efforts, which seek to increase the company’s occupancy; raise the company’s rental rates; increase the company’s rentable square feet; increase the company’s aggregate rental revenue; lengthen the company’s average lease term; increase the company’s average lease size; and improve the company’s tenant credit quality. The company has also aggregated smaller spaces in order to offer larger blocks of office space, including multiple floors, that are attractive to larger, higher credit-quality tenants and to offer new, pre-built suites with improved layouts. This strategy has shown attractive results to date, as illustrated by the case studies which are described in “The Company Business and Properties—Renovation and Repositioning Case Studies,” and the company believes it has the potential to improve the company’s operating margins and cash flows in the future. The company believes the company will continue to enhance its tenant base and improve rents as the company’s pre-renovation leases continue to expire and be re-leased.

The Empire State Building is the company’s flagship property and provides the company with a significant and diversified source of revenue through its office and retail leases, observatory operations and broadcasting licenses and related leased space. On a pro forma basis, during the year ended December 31, 2011, the company generated approximately $201.3 million of revenue from the Empire State Building. The ongoing repositioning of the Empire State Building, which comprises 2,683,205 rentable square feet of office space and 163,655

 

 

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rentable square feet of retail space, is representative of the company’s strategic vision for its Manhattan office properties. To date, the renovation and repositioning efforts have enabled the supervisor to lease significant amounts of space at the Empire State Building to new higher credit-quality tenants, including: LF USA; Skanska; Coty, Inc.; the Federal Deposit Insurance Corporation; Funaro & Co.; LinkedIn; Noven Pharmaceuticals; People’s Daily Online USA; Taylor Global; The Freeh Group; Turkish Airlines; and World Monuments Fund. The company believes completing the repositioning program for the Empire State Building, as well as its other Manhattan office properties, represents a significant growth opportunity for the company.

The company is led by Anthony E. Malkin, its Chairman, Chief Executive Officer and President, who has a strong reputation in the industry for quality management, repositioning and marketing expertise. Mr. Malkin, together with the company’s senior management team, has developed the company’s strategy with a focus on tenant and broker relationships and the cultivation of the company’s brand to attract higher credit-quality tenants to its improved buildings and negotiate attractive rental terms. Mr. Malkin has over 23 years of real estate experience specifically in expanding, renovating, repositioning and managing this portfolio. The company’s senior management team has an average of approximately 29 years of experience covering all aspects of real estate, including asset and property management, leasing, marketing, acquisitions, construction, development, legal and finance, and Messrs. Malkin, Thomas P. Durels and Thomas N. Keltner, Jr. worked together for the supervisor for over 22 years, and have supervised the design and implementation of the company’s renovation and repositioning program.

The Company’s Competitive Strengths

The company believes that it distinguishes itself from other owners and operators of office and retail properties as a result of the following competitive strengths:

 

   

Irreplaceable Portfolio of Office Properties in Midtown Manhattan. The company’s Manhattan office properties are located in one of the most prized office markets in the world due to a combination of supply constraints, high barriers to entry, near-term and long-term prospects for job creation, vacancy absorption and rental rate growth. The company’s management believes these properties could not be replaced today on a cost-competitive basis, if at all. As of December 31, 2011, the company owned seven Manhattan office properties encompassing approximately 5.9 million rentable square feet of office space, including the Empire State Building, the company’s flagship property and the world’s most famous office building. All of these properties include premier retail space on their ground floor and/or lower levels, which comprise 432,446 rentable square feet in the aggregate and some of which have recently undergone significant renovations.

 

   

Expertise in Repositioning and Renovating Manhattan Office Properties. The company has substantial expertise in renovating and repositioning Manhattan office properties, having invested a total of approximately $306.8 million (excluding tenant improvement costs and leasing commissions) in the Manhattan office properties since the supervisor assumed day-to-day management of these properties beginning with One Grand Central Place in November 2002. The company has gained substantial experience in upgrading, renovating and modernizing (or are in the process thereof) all building lobbies, corridors, bathrooms and elevator cabs and old, antiquated spaces to include new ceilings, lighting, pantries and base building systems (including electric distribution and air conditioning, as well as enhanced tenant amenities). The supervisor has successfully aggregated and is continuing to aggregate smaller spaces to offer larger blocks of space, including multiple floors, that are attractive to larger, higher credit-quality tenants and to offer new, pre-built suites with improved layouts. As part of this program, the supervisor converted some or all of the ground office floors of certain of its Manhattan office properties to higher rent retail space. The company believes that the post-renovation high quality of its buildings and the service the company provides also attract higher credit-quality tenants and allow it to grow cash flow.

 

 

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Leader in Energy Efficiency Retrofitting. The company has pioneered certain practices in energy efficiency at the Empire State Building where the company has partnered with the Clinton Climate Initiative, Johnson Controls Inc., Jones Lang LaSalle and the Rocky Mountain Institute to create and implement a groundbreaking, replicable process for integrating energy efficiency retrofits in the existing built environment. The reduced energy consumption reduces costs for the company and its tenants, and the company believes creates a competitive advantage for its properties. The company believes that higher quality tenants in general place a higher priority on sustainability, controlling costs and minimizing contributions to greenhouse gases. The company believes its expertise in this area gives it the opportunity to attract higher quality tenants at higher rental rates and to reduce the company’s expenses. As a result of the company’s efforts, the Empire State Building is now an Energy Star building and has been awarded LEED EBOM-Gold certification. The Company plans on implementing energy efficiency retrofitting projects in its Manhattan office properties based on its work at the Empire State Building. Finally, the company maintains a series of management practices utilizing recycling of tenant and construction waste, recycled content carpets, low off-gassing paints and adhesives, “green” pest control and cleaning solutions, and recycled paper products throughout the company’s office portfolio. The company believes that its portfolio’s attractiveness is enhanced by these practices and that this should result in higher rental rates, longer lease terms and higher quality tenants.

 

   

Attractive Retail Locations in Densely Populated Metropolitan Communities. As of December 31, 2011, the company’s portfolio also included six standalone retail properties and retail space at the ground floor and/or lower levels of its Manhattan office properties, encompassing 636,898 rentable square feet in the aggregate, which were approximately 86.3% leased in the aggregate (or 87.0% giving effect to leases signed but not yet commenced as of that date). All of these properties are located in premier retail corridors with convenient access to mass transportation, a diverse tenant base and high pedestrian traffic and/or main destination locations. The company’s retail portfolio includes 615,465 rentable square feet located in Manhattan and 21,433 rentable square feet located in Westport, Connecticut. The company’s retail tenants cover a number of industries, including financial services, and include AT&T; Ann Taylor; Bank of America; Bank Santander (Sovereign Bank); Best Buy; Billabong; Charles Schwab; Chipotle; Duane Reade; Ethan Allen; the GAP; HSBC; JP Morgan Chase; Kate Spade; Loews Theatre; Lululemon; Men’s Wearhouse; Nike; Panera Bread; Potbelly Sandwich Works; Sprint; Starbucks; Theory; TJ Maxx; and Walgreens.

 

   

Experienced and Committed Management Team with Proven Track Record. The company’s senior management team is highly regarded in the real estate community and has extensive relationships with a broad range of brokers, owners, tenants and lenders. The company has developed relationships the company believes enable it to both secure high credit-quality tenants on attractive terms, as well as provide it with potential acquisition opportunities. The company has substantial in-house expertise and resources in asset and property management, leasing, marketing, acquisitions, construction, development and financing and a platform that is highly scalable. Members of the company’s senior management team have worked in the real estate industry for an average of approximately 29 years, and Messrs. Malkin, Durels and Keltner have worked together for the supervisor for over 22 years. Upon completion of the IPO, the company’s senior management team is expected to own     % of the company’s common stock on a fully diluted basis, and therefore their interests are expected to be aligned with those of the company’s stockholders, and they are incentivized to maximize returns for the company’s stockholders.

 

   

Strong Balance Sheet Well Positioned For Future Growth. Upon completion of the consolidation and the IPO, the company expects to have pro forma total debt outstanding of approximately $1.05 billion, with a weighted average interest rate of 5.29%, a weighted average maturity of 4.2 years and 83.2% of which is fixed-rate indebtedness. Additionally, the company expects to have approximately

 

 

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$170.1 million of available borrowing capacity under its loans on a pro forma basis. Upon completion of the IPO and on a pro forma basis for the year ended December 31, 2011, the company had a debt-to-earnings before interest, income tax, depreciation and amortization, or EBITDA, ratio of approximately 5.46x. For the year ended December 31, 2011, the company’s pro forma EBITDA and pro forma net income were approximately $192.6 million and $72.8 million, respectively. The company has no debt maturing in 2012 and approximately $58.0 million maturing in 2013.

Business and Growth Strategies

The company’s primary business objectives are to maximize cash flow and total returns to its stockholders and to increase the value of the company’s properties through the pursuit of the following business and growth strategies:

 

   

Lease-up Available Space at Manhattan Office Properties. As of December 31, 2011, the company’s Manhattan office properties were approximately 76.2% leased (or 80.3% giving effect to leases signed but not yet commenced as of that date) and had approximately 1.2 million rentable square feet of available space (excluding leases signed but not yet commenced). This compares to an average of 90.4% leased in midtown Manhattan according to RCG as of December 31, 2011. The company believes its renovation and repositioning program for its Manhattan office properties is a catalyst for additional lease-up. The company has created large blocks of available space and intends to continue to create such blocks over the next several years as part of the company’s comprehensive repositioning strategy to attract larger, higher credit-quality tenants at higher rents for longer lease terms with higher average retention rates and greater prospects for growth. Individual and multiple floors have been assembled and are being assembled for larger users. To date the company believes these efforts have accelerated its ability to lease space to new higher credit-quality tenants, many of which have expanded the office space they lease from the company over time. Examples of this include LF USA, Coty. Inc., the Federal Deposit Insurance Corporation, and Actimize which collectively have leases signed with the company for over 1,275,265 rentable square feet that represent additional annualized base rent of $51,179,454 as of December 31, 2011. The company also employs a pre-built suite strategy in selected portions of some of the properties to appeal to many credit-worthy smaller tenants by fitting out some available space with new ceilings, lighting, pantries and base building systems (including electric distribution and air conditioning) for immediate occupancy.

 

   

Increase Existing Below-Market Rents. The company believes it can capitalize on the successful repositioning of its Manhattan office portfolio and improving market fundamentals to increase rents. For example, the company expects to benefit from the re-leasing of 23.8%, or approximately 1.4 million rentable square feet (including month-to-month leases), of its Manhattan office leases expiring through December 31, 2014, which the company generally believes are currently at below market rates. These expiring leases represent a weighted average base rent of $35.58 per square foot based on current measurements. As older leases expire, the company expects to continue to upgrade certain space to further increase rents and the company expects to increase the total rentable square footage of such space as a result of remeasurement and application of market loss factors to the company’s space which the company expects will generate additional rental revenue.

 

   

Complete the Redevelopment and Repositioning of the Company’s Current Portfolio. The company intends to continue to increase occupancy, improve tenant quality and enhance cash flow and value by completing the renovation and repositioning of its Manhattan office properties. The company intends selectively to continue to allow leases for smaller spaces to expire or relocate smaller tenants in order to aggregate, demolish and re-demise existing office space into larger blocks of vacant space, which the company believes will attract higher credit-quality tenants at higher rental rates. The company applies rigorous underwriting analysis to determine if aggregation of vacant space for future

 

 

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leasing to larger tenants will improve its cash flows over the long term. In addition, the company is a leader in developing economically justified energy efficiency retrofitting and sustainability and has made it a portfolio-wide initiative. The company believes this makes its properties desirable to high credit-quality tenants at higher rental rates and longer lease terms.

 

   

Pursue Attractive Acquisition and Development Opportunities. The company will opportunistically pursue attractive opportunities to acquire office and retail properties, including the option properties. The company intends to focus its acquisition strategy primarily on Manhattan office properties and, to a lesser extent, office and multi-tenanted retail properties in densely populated communities in the greater New York metropolitan area and other markets the company may identify in the future. The company believes it can utilize its industry relationships (including well-known real estate owners in Manhattan), brand recognition, and expertise in redeveloping and repositioning office properties to identify acquisition opportunities where the company believes it can increase occupancy and rental rates. The company’s strong balance sheet, access to capital, and ability to offer operating partnership units in tax deferred acquisition transactions should give the company significant flexibility in structuring and consummating acquisitions.

 

   

Proactively Manage the Company’s Portfolio. The company believes its proactive, service-intensive approach to asset and property management helps increase occupancy and rental rates. The company utilizes its comprehensive building management services and its strong commitment to tenant and broker relationships and satisfaction to negotiate attractive leasing deals and to attract high credit-quality tenants. The company proactively manages its rent roll and maintains continuous communication with its tenants. The company believes long-term tenant relationships will improve its operating results over time by reducing leasing, marketing and tenant improvement costs and reducing tenant turnover.

Company Information

As of December 31, 2011, the company had approximately 602 employees, 102 of whom were managers and professionals. The company’s principal executive offices are located at One Grand Central Place, 60 East 42nd Street, New York, New York 10165. In addition, the company has seven additional regional leasing and property management offices in Manhattan and the greater New York metropolitan area. The company’s telephone number is (212) 953-0888. The company’s website address is www.                    . The information on or otherwise accessible through, the company’s website does not constitute a part of this prospectus/consent solicitation.

 

 

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The Properties

As of December 31, 2011, the company’s portfolio consisted of 12 office properties and six standalone retail properties totaling approximately 8.3 million rentable square feet and was approximately 80.1% leased (or 83.1% giving effect to leases signed but not yet commenced as of that date). In addition, the company owned entitled land that will support the development of an approximately 340,000 rentable square foot office building and garage (Metro Tower) at the Stamford Transportation Center in Stamford, Connecticut, adjacent to one of the company’s office properties, as of December 31, 2011. The table below presents an overview of the company’s portfolio and the option properties as of December 31, 2011:

 

Property Name

 

Submarket

 

Year Built /
Renovated(1)

  Rentable
Square
Feet(2)
    Percent
Leased(3)
    Annualized
Base Rent(4)
    Annualized
Base Rent Per
Leased Square
Foot(5)
    Net Effective
Rent Per
Leased Square
Foot(6)
    Number  of
Leases(7)
 

Manhattan Office Properties

             

The Empire State Building

 

Penn Station- Times Sq. South

  1930 / In process           $ 39.37     

Office(8)

        2,683,205        66.2   $ 62,055,861      $ 34.92          281   

Retail(9)

        163,655        89.7   $ 14,427,177      $ 98.32          24   

One Grand Central Place

  Grand Central   1930 / In process           $ 47.36     

Office

        1,166,975        79.2   $ 41,395,307      $ 44.81          297   

Retail

        68,343        87.9   $ 5,416,401      $ 90.19          18   

250 West 57th Street

  Columbus Circle- West Side   1921 / In process           $ 44.10     

Office

        476,435        83.5   $ 15,849,357      $ 39.86          184   

Retail

        54,107        100.0   $ 4,479,500      $ 82.79          6   

501 Seventh Avenue

  Penn Station- Times Sq. South   1923 / In process           $ 36.70     

Office

        431,971        91.0   $ 13,643,614      $ 34.70          34   

Retail

        37,765        93.1   $ 1,745,673      $ 49.65          11   

1359 Broadway

  Penn Station- Times Sq. South   1924 / In process           $ 37.88     

Office

        438,311        95.9   $ 15,693,718      $ 37.33          35   

Retail

        27,618        78.9   $ 1,665,115      $ 76.37          6   

1350 Broadway(10)

  Penn Station- Times Sq. South   1929 / In process           $ 55.01     

Office

        364,474        75.6   $ 11,007,684      $ 39.93          76   

Retail

        30,895        100.0   $ 5,724,987      $ 185.30          6   

1333 Broadway

  Penn Station- Times Sq. South   1915 / In process           $ 43.98     

Office

        296,565        93.2   $ 11,391,478      $ 41.23          10   

Retail

        50,063        6.4   $ 725,713      $ 226.86          4   
     

 

 

     

 

 

       

 

 

 

Sub-Total / Weighted Average Manhattan Office Properties

    6,290,382        76.6   $ 205,221,585      $ 42.61      $ 42.34        992   
     

 

 

     

 

 

       

 

 

 

Office

        5,857,936        76.2   $ 171,037,019      $ 38.31          917   

Retail

        432,446        81.4   $ 34,184,566      $ 97.13          75   

Greater New York Metropolitan Area Office Properties

           

First Stamford Place(11)

 

Stamford, Connecticut(12)

  1986 / 2003     784,487        89.9   $ 27,515,552      $ 39.04      $ 39.30        35   

Metro Center

  Stamford, Connecticut(12)   1987 / 1999     275,758        100.0   $ 12,927,572      $ 46.88      $ 46.85        24   

383 Main Avenue

  Norwalk, Connecticut(13)   1985 / 1996     260,468        82.5   $ 5,933,932      $ 27.61      $ 27.94        19   

500 Mamaroneck Avenue

 

Harrison,

New York(14)

  1986 / 2004     289,682        92.7   $ 7,250,887      $ 26.99      $ 27.13        31   

10 Bank Street

  White Plains, New York(15)   1989 / 2001     228,951        85.9   $ 6,580,955      $ 33.47      $ 33.94        27   
     

 

 

     

 

 

       

 

 

 

Sub-Total / Weighted Average Greater New York Metropolitan Area Office Properties

    1,839,346        90.3   $ 60,208,898      $ 36.25      $ 36.48        136   

Total / Weighted Average Office Properties

    7,697,282        79.6   $ 231,245,917      $ 37.75        —          1,053   
     

 

 

     

 

 

       

 

 

 

 

 

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Property Name

  Submarket   Year Built /
Renovated(1)
    Rentable
Square
Feet(2)
    Percent
Leased(3)
    Annualized
Base Rent(4)
    Annualized
Base Rent Per
Leased Square
Foot(5)
    Net Effective
Rent Per
Leased Square
Foot(6)
    Number  of
Leases(7)
 

Standalone Retail Properties

  

           

10 Union Square

  Union Square     1988 / 1997        58,005        92.1   $ 3,708,753      $ 69.39      $ 70.01        12   

1542 Third Avenue

  Upper East Side     1993(16)       56,250        100.0   $ 2,833,796      $ 50.38      $ 47.15        3   

1010 Third Avenue

  Upper East Side     1963 / 2007(17)        44,662        100.0   $ 2,812,709      $ 62.98      $ 65.88        2   

77 West 55th Street

  Midtown     1962(16)        24,102        100.0   $ 2,104,651      $ 87.32      $ 79.62        3   

69-97 Main Street

  Westport,
Connecticut
    1922 / 2005        17,103        88.3   $ 1,303,460      $ 86.33      $ 88.24        4   

103-107 Main Street

  Westport,
Connecticut
    1900(16)        4,330        100.0   $ 423,696      $ 97.85      $ 94.69        3   
     

 

 

     

 

 

       

 

 

 

Sub-Total / Weighted Average Standalone Retail Properties

   

    204,452        96.8   $ 13,187,065      $ 66.64      $ 65.68        27   

Total / Weighted Average Retail Properties(18)

  

    636,898        86.3   $ 47,371,631      $ 86.15        —          102   
     

 

 

     

 

 

       

 

 

 

Portfolio Total

  

    8,334,180        80.1   $ 278,617,548      $ 41.74      $ 41.57        1,155   
     

 

 

     

 

 

       

 

 

 

Option Properties

  

           

112-122 West 34th Street(19)

  Penn Station-
Times Sq. South
   
 
1954 / In
process
  
  
          $ 31.98     

Office

        608,050        88.9           63   

Retail

        133,437        100.0           3   

1400 Broadway

  Penn Station-
Times Sq. South
   
 
1930 / In
process
  
  
          $ 35.43     

Office

        854,087        79.1           82   

Retail

        19,861        36.8           7   
     

 

 

           

 

 

 

Option Properties Total

  

    1,615,435                155   
     

 

 

           

 

 

 

 

(1) For more information regarding the status of ongoing renovations at certain of the company’s properties, see “The Company Business and Properties—Description of the Company’s Properties.”
(2) Office property measurements are based on the Real Estate Board of New York measurement standards; retail property measurements are based on useable square feet. Excludes (i) 132,360 square feet of space across the company’s portfolio attributable to building management use and tenant amenities and (ii) 71,054 square feet of space attributable to the company’s observatory.
(3) Based on leases signed and commenced as of December 31, 2011 and calculated as (i) rentable square feet less available square feet divided by (ii) rentable square feet.
(4) Annualized base rent for office properties is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements and free rent)) for the month ended December 31, 2011 for leases commenced as of December 31, 2011, by (ii) 12. Total abatements and free rent with respect to the office properties for leases in effect as of December 31, 2011 for the 12 months ending December 31, 2012 are $4,578,698. Total annualized base rent, net of abatements and free rent, for the company’s office properties is $226,667,219. Annualized base rent for retail properties (including the retail space in the company’s Manhattan office properties) is calculated by multiplying (i) base rental payments (defined as cash base rents (before abatements, tenant reimbursements and free rent)) for the month ended December 31, 2011 for leases commenced as of December 31, 2011, by (ii) 12. Total abatements, tenant reimbursements and free rent with respect to the retail properties (including the retail space in the company’s Manhattan office properties) for leases in effect as of December 31, 2011 for the 12 months ending December 31, 2012 are $75,954. Total annualized base rent, net of abatements, tenant reimbursements and free rent, for the company’s retail properties is $47,295,677. Annualized base rent data for the company’s office and retail properties is as of December 31, 2011 and does not reflect scheduled lease expirations for the 12 months ending December 31, 2012.
(5) Represents Annualized Base Rent under leases commenced as of December 31, 2011 divided by leased square feet.
(6) Net effective rent per leased square foot represents (i) the contractual base rent for office and retail leases in place as of December 31, 2011, calculated on a straight-line basis to amortize free rent periods and abatements, but without regard to tenant improvement allowances and leasing commissions, divided by (ii) square footage under commenced leases as of December 31, 2011.
(7) Represents the number of leases at each property or on a portfolio basis. If a tenant has more than one lease, whether or not at the same property, but with different expirations, the number of leases is calculated equal to the number of leases with different expirations.
(8) Includes 88,499 rentable square feet of space leased by the company’s broadcasting tenants.
(9) Includes 4,337 rentable square feet of space leased by Host Services of New York, a licensee of the company’s observatory.
(10) Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the company, of approximately 39 years (expiring July 31, 2050).
(11) First Stamford Place consists of three buildings.
(12) This submarket is part of the Stamford, Connecticut—central business district (CBD) submarket as defined by RCG. See “Economic and Market Overview.”
(13) This submarket is part of the South Central Stamford, Connecticut submarket as defined by RCG. See “Economic and Market Overview.”
(14) This submarket is part of the Eastern Westchester County submarket as defined by RCG. See “Economic and Market Overview.”
(15) This submarket is part of the White Plains, New York—CBD submarket as defined by RCG. See “Economic and Market Overview.”
(16) No major renovation activity was undertaken at this property.
(17) This property underwent major renovations in 2007 to coincide with the signing of a significant retail lease.

 

 

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(18) Includes 432,446 rentable square feet of retail space in the company’s Manhattan office properties.
(19) 112-122 West 34th Street consists of two parcels having separate owners and ownership structures. The real property interests that the company will acquire with respect to the parcel located at 112-120 West 34th Street consist of (i) a ground leasehold interest currently held by 112 West 34th Street Associates L.L.C., one of the affiliates of the supervisor with whom the company has entered into an option agreement and (ii) an operating leasehold interest currently held by 112 West 34th Street Company L.L.C., another affiliate of the supervisor with whom the company has entered into an option agreement. The real property interests that the company will acquire with respect to the parcel located at 122 West 34th Street consist of (i) a fee interest and a subleasehold interest currently held by 112 West 34th Street Associates L.L.C. and (ii) an operating leasehold interest currently held by 112 West 34th Street Company L.L.C.

Background of and Reasons for the Consolidation

The Subject LLCs, the Private Entities and the Management Companies

The three subject LLCs are publicly-registered limited liability companies originally formed as partnerships by principals of the supervisor from 1953 to 1961. The principals of the supervisor during this period consisted of Lawrence A. Wien, until his death in 1988 and, beginning in 1958, Peter L. Malkin. Anthony E. Malkin joined Peter L. Malkin as a principal in 1989. In exercising control, Peter L. Malkin and Anthony E. Malkin have been, and continue to be, subject to fiduciary duties owed to multiple sets of equity owners in each subject LLC and private entity. Each subject LLC was formed to acquire the fee title or long-term ground lease interest in an office property located in Manhattan and to lease the property to an operating lessee, which operates the property. The private entities, including the operating lessees were formed between 1953 and 2008 and own office properties, retail properties and, in one case, fully entitled land including a development site, in Manhattan and the greater New York metropolitan area. The supervisor and the Malkin Family provide supervisory and other services for each subject LLC, each operating lessee and the other private entities.

As lessor, each subject LLC receives from its operating lessee fixed base rent and overage rent (equal to 50% of the operating lessee’s net operating profit above a small specified threshold). Each operating lessee was formed initially as a partnership, the partners of which included Lawrence A. Wien and Harry B. Helmsley, and later converted to a limited liability company. Under the operating lease, the subject LLC, as lessor, has no right to operate the property. The operating lessee does not require any approval from the subject LLC for any operating decision. As such, the operating lessee makes all decisions relating to the operations of the property, including decisions as to leasing the property and selection of tenants and timing of leasing; what repairs to make, how much to spend on them and how to maintain the property (consistent with its obligation to repair, maintain and replace the property, subject to the lessor’s consent for certain alterations which must be reasonably given); whether to hire property management and leasing agents or to handle such work internally; how to use the cash flow from the property; whether to seek financing for major expenditures; and whether to use cash flow for property-related expenses or to establish reserves. This absolute control affects the cash returns to a subject LLC above basic rent because, under the lease, the subject LLC and operating lessee have a 50/50 split of net operating profit above a small specified threshold.

A subject LLC, as lessor, cannot decide whether to take steps to maximize the value of the property or to undertake improvements or repairs and maintenance. A subject LLC, as lessor, also cannot determine to obtain additional financing to maximize cash flows and therefore distributions unless the operating lessee also agrees to the financing, because, in view of the operating lessee’s rights under the operating lease, lenders generally could be expected to require in connection with any significant financing that the operating lessee subordinate its interest to the financing. A subject LLC, as lessor, cannot decide whether to sell the entire property as any property sale not agreed to by the operating lessee necessarily will be subject to the operating lease. The supervisor believes this limitation reduces the value of the subject LLCs unless sold with the operating lease position.

The supervisor, which is related to the principals who formed the subject LLCs, was appointed as the supervisor of the subject LLCs pursuant to the original partnership agreements of each of the subject LLCs and is

 

 

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the only party which has performed, and is authorized to perform, this role under the subject LLCs’ organizational documents. The subject LLCs were originally established as general partnerships with no managing general partner or managing member and the supervisor is responsible for the operations and administrative functions on behalf of the subject LLCs. The supervisor, in its capacity as supervisor of each of the subject LLCs, provides all administrative and oversight services, such as maintaining the entity’s records, including those related to participants, performing physical inspections of the property, providing or coordinating certain counsel services to the subject LLC, reviewing insurance coverage, conducting annual supervisory review meetings, payment of monthly and additional distributions to the participants, payment of all other disbursements including real estate taxes, review of operations of the properties by the operating lessee, preparation and filing of tax returns, preparation of financial statements of the subject LLC and preparation of quarterly, annual and other periodic filings with the SEC and applicable state authorities and distribution of tax information and other information to the participants. The supervisor owes a fiduciary duty to the subject LLCs.

Principals of the supervisor have been partners, members or agents in the operating lessees from the origination of these entities, and in its capacity as supervisor of the operating lessees, the supervisor oversees the day-to-day operations of the operating lessees and the properties.

Each of the agents is a member of the subject LLCs with the right to approve actions requiring the consent of members of the subject LLCs, subject to approval of certain significant actions by participants to the extent required under the participating agreements. The agents, in their capacities as agents, have no economic interest in the subject LLCs. From inception, the agents have been persons who have been principals of, or are related to principals of, the supervisor. The supervisor has played the central role in administering the subject LLCs and the agents’ role has been primarily performing ministerial functions and consenting to matters proposed by the supervisor for which the participants have given any required consent. The agents have a duty to comply with the participating agreements and the organizational documents of the subject LLCs and owe a fiduciary duty to the participants in their participation groups.

The participants are divided into participating groups and the participants in each participating group have been granted participations in the membership interest of one of the agents. Under the participating agreements, the agent has the right to take all actions with respect to its membership interest, except for certain significant actions, such as sales, financings and amendment to the operating lease, that require the consent of the participants. The agents distribute all amounts received by them to the participants in their participating group, pro rata in proportion to their participation interests.

 

 

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The Malkin Holdings group and the Helmsley estate own, on an aggregate basis, the following interests in each of the subject LLCs, each of the operating lessees and the private entities (other than the operating lessees), as a group, based on exchange values and percentage of aggregate exchange value for the applicable entity:

 

Entity

   Malkin Holdings group     Helmsley estate  
      Exchange Value      Percentage     Exchange Value      Percentage  

Empire State Building Associates L.L.C.

          

As holders of participation interests(1)

   $ 78,310,305         6.47   $ 992,544         0.08

Override Interests(2)

   $ 110,573,562         9.14     
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 188,883,867         15.61   $ 992,544         0.08

60 East 42nd St. Associates L.L.C.

          

As holders of participation interests(1)

   $ 21,874,553         7.22   $ 1,169,162         0.39

Override Interests(2)

   $ 30,202,722         9.97     
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 52,077,275         17.19   $ 1,169,162         0.39

250 West 57th St. Associates L.L.C.

          

As holders of participation interests(1)

   $ 9,530,308         6.71   $ 394,684         0.28

Override Interests(2)

   $ 10,564,842         7.44     
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 20,095,150         14.15   $ 394,684         0.28

Empire State Building Company L.L.C.

          

As holders of participation interests(1)

   $ 25,307,051         2.13   $ 758,481,945         63.75

Override Interests(2)

   $ 54,167,577         4.55     
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 79,474,628         6.68   $ 758,481,945         63.75

Lincoln Building Associates L.L.C.

          

As holders of participation interests(1)

   $ 19,367,188         6.75   $ 77,468,700         27.0

Override Interests(2)

   $ 28,692,131         10.0     
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 48,059,319         16.75   $ 77,468,700         27.0

Fisk Building Associates L.L.C.

          

As holders of participation interests(1)

   $ 15,974,739         12.17   $ 41,355,545         31.50

Override Interests(2)

   $ 27,553,025         21.24     
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 43,527,764         33.41   $ 41,355,545         31.50

Other Private Entities

          

As holders of participation interests(1)

   $ 157,968,180         17.67   $ 144,913,923         20.02

Override Interests(2)

   $ 35,582,320         4.91     
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 193,550,500         22.58   $ 144,913,923         20.02

 

(1) Does not include participation interests in which the Malkin Holdings group controls the vote, but does not have an economic interest.
(2) The percentage determined is based on the percentage of distributions that will be received based on the exchange values, which were determined as described in “Exchange Value and Allocation of Common Stock—Derivation of Exchange Value.”

 

 

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The following is a list of the subject LLCs and the private entities and the appraised value of the real property interests owned by the subject LLCs and the private entities, before deducting mortgage indebtedness or other liabilities and the exchange value, which is calculated as described in this prospectus/consent solicitation after deducting mortgage indebtedness and other liabilities:

 

Entity(1)

   Appraised  Property
Value(2)
     Appraised
Entity
Value
     Exchange
Value
 

Empire State Building

   $ 2,520,000,000         

Empire State Building Associates L.L.C.

      $ 1,300,500,000       $ 1,209,442,285   

Empire State Building Company L.L.C.(3)

      $ 1,219,500,000       $ 1,189,775,581   
     

 

 

    

 

 

 

Total

      $ 2,520,000,000       $ 2,399,217,866   

One Grand Central Place

   $ 687,000,000         

60 East 42nd St. Associates L.L.C.

      $ 350,500,000       $ 303,007,222   

Lincoln Building Associates L.L.C.(4)

      $ 336,500,000       $ 286,921,306   
     

 

 

    

 

 

 

Total

      $ 687,000,000       $ 589,928,528   

250 West 57th St.

   $ 316,000,000         

250 West 57th St. Associates L.L.C.

      $ 163,000,000       $ 142,086,267   

Fisk Building Associates L.L.C.(5)

      $ 153,000,000       $ 131,287,437   
     

 

 

    

 

 

 

Total

      $ 316,000,000       $ 273,373,704   

1333 Broadway

        

1333 Broadway Associates L.L.C.

   $ 189,000,000       $ 189,000,000       $ 136,432,404   

1350 Broadway

        

1350 Broadway Associates L.L.C.

   $ 186,000,000       $ 186,000,000       $ 145,057,081   

1359 Broadway

        

Marlboro Building Associates L.L.C.

   $ 192,000,000       $ 192,000,000       $ 142,870,166   

501 Seventh Avenue

   $ 159,000,000         

Seventh & 37th Building Associates L.L.C.

      $ 81,500,000       $ 56,063,072   

501 Seventh Avenue Associates L.L.C.

      $ 77,500,000       $ 52,625,499   
     

 

 

    

 

 

 

Total

      $ 159,000,000       $ 108,688,571   

69-97 Main Street

        

Soundview Plaza Associates II L.L.C.

   $ 25,000,000       $ 25,000,000       $ 15,375,300   

1010 Third Avenue and 77 West 55th Street

        

East West Manhattan Retail Portfolio L.P.

   $ 56,000,000       $ 56,000,000       $ 26,582,583   

Metro Center

        

One Station Place, Limited Partnership

   $ 138,000,000       $ 138,000,000       $ 36,970,060   

10 Union Square

        

New York Union Square Retail L.P.

   $ 49,000,000       $ 49,000,000       $ 27,098,031   

103-107 Main Street

        

Westport Main Street Retail L.L.C.

   $ 5,000,000       $ 5,000,000       $ 4,925,541   

First Stamford Place(6)

   $ 258,000,000         

Fairfax Merrifield Associates L.L.C.

      $ 80,444,400       $ 4,212,136   

Merrifield Apartments Company L.L.C.

      $ 80,444,400       $ 4,212,136   

First Stamford Place L.L.C.

      $ 97,111,200       $ 4,832,916   
     

 

 

    

 

 

 

Total

      $ 258,000,000       $ 13,257,188   

10 Bank Street

        

1185 Swap Portfolio L.P.

   $ 45,000,000       $ 45,000,000       $ 10,063,663   

1542 Third Avenue

        

1185 Swap Portfolio L.P.

   $ 32,000,000       $ 32,000,000       $ 11,953,171   

383 Main Ave

        

Fairfield Merrittview Limited Partnership

   $ 40,000,000       $ 40,000,000       $ 8,232,647   

500 Mamaroneck Ave

        

500 Mamaroneck Avenue L.P.

   $ 44,000,000       $ 44,000,000       $ 5,986,141   

BBSF LLC

   $ 14,600,000       $ 14,600,000       $ 14,600,000   

Supervisor and Management Companies(7)

   $ 14,525,000       $ 14,525,000       $ 15,921,278   
  

 

 

    

 

 

    

 

 

 

Total

   $ 4,970,125,000       $ 4,970,125,000       $ 3,986,533,923   
  

 

 

    

 

 

    

 

 

 

 

 

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(1) Excludes three private entities which are the ground lessees and an operating lessee of two properties that are supervised by the supervisor, having an appraised value of $715,100,000. The operating partnership has entered into option agreements pursuant to which it has the option to acquire their property interests upon the final resolution of certain ongoing litigation with respect to these properties. The appraised values of such properties are the appraised values the properties would have had if the litigation is resolved, and were determined on a basis consistent with the exchange values of the subject LLCs and the private entities.
(2) Represents the appraised value of each property owned (or in the case of a property subject to a third-party ground lease, the value of the interest as ground lessee) by or subject to an operating lease with each subject LLC and each private entity and the appraised value of management companies.
(3) Operating lessee of Empire State Building Associates L.L.C.
(4) Operating lessee of 60 East 42nd St. Associates L.L.C.
(5) Operating lessee of 250 West 57th St. Associates L.L.C.
(6) First Stamford Place L.L.C. is a 37.64% co-tenant with Fairfax Merrifield Associates L.L.C. and Merrifield Apartments Company L.L.C., together owning a 62.36% interest. Merrifield Apartments Company L.L.C. is the operating lessee, owning a 50.00% interest in the co-tenancy, for an aggregate ownership interest of 31.18% in the property.
(7) The value represents the appraised value of the management companies excluding the value attributable to the supervisor’s overrides, which are included in the value of the overrides that the Malkin Holdings group holds in the subject LLCs and the private entities.

The Supervisor’s Reasons for Proposing the Consolidation

The supervisor proposed the consolidation and recommends that you vote “FOR” the consolidation. The supervisor believes this transaction represents the best opportunity for value enhancement for your investment in the subject LLC.

From time to time, for various reasons, the supervisor has pursued sales of properties supervised by the supervisor in Manhattan, when the supervisor believed a sale would produce a higher return than continuing to hold the property. After the death of Leona Helmsley in August 2007, the supervisor briefly considered, and had discussions with representatives of the Helmsley estate concerning, the possible sale of the Empire State Building. It was ultimately decided that there was greater value for Empire State Building Associates L.L.C. and Empire State Building Company L.L.C. in holding, improving, and repositioning the Empire State Building rather than selling the Empire State Building in its then-current condition. In 2010, Anthony E. Malkin and Peter L. Malkin, as principals of the supervisor, met with the executors of the Helmsley estate, as a significant investor, to discuss the merits of a consolidation of several properties, including the subject LLCs, and a subsequent initial public offering of the consolidated entity. Thereafter, Anthony E. Malkin and Peter L. Malkin, as principals of the supervisor, investigated the feasibility of a consolidation transaction and IPO of the company which would be formed in connection with the consolidation and took steps to consider and pursue the consolidation.

The Helmsley estate has expressed its intention that, if the consolidation and IPO do not occur, it will liquidate its interests in the private entities, including each of the operating lessees. The supervisor believes that such liquidation by the Helmsley estate is required pursuant to the specific terms of Leona Helmsley’s will.

In the event of such a liquidation, the supervisor and the other participants in the subject LLCs and the private entities will not be able to influence or control the selection of the purchaser. Such purchaser would own the Helmsley estate’s current position in the operating lessee of the Empire State Building, which would provide it with the ability to veto all decisions, and a large percentage of each of the other two operating lessees. Since an operating lessee controls all aspects of the operations of its property, and that control allows it to make decisions that affect property performance and the availability of profits which are shared 50/50 with the subject LLCs, such purchaser may take actions which adversely affect the value and distributions for the Empire State Building Associates L.L.C. and its participants and could influence materially the activities in the other two subject LLCs.

The consolidation and IPO would permit the Helmsley estate to monetize a significant portion of its interests at the IPO price without creating such a potentially adverse event. Further, it would also provide a liquid trading market for the Helmsley estate to monetize the remainder of its interests in an efficient manner that will be transparent to the public markets.

 

 

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The supervisor believes it is in the best interests of the participants and the company to provide to the Helmsley estate the right to receive an allocation of excess IPO proceeds in exchange for their interests, to the extent available after providing cash to redeem non-accredited investors in the private entities and participants in the subject LLCs (excluding the Wien group) who elect to receive cash and other uses of proceeds. This would include proceeds from any upsize of the IPO and any exercise of the underwriters’ overallotment option.

The supervisor has overseen the engagement by the subject LLC of independent property management and leasing agents, developed and substantially effected a comprehensive renovation and repositioning program for improving the physical condition of and upgrading the credit quality of tenants at the property, and raised the property’s profile as part of a well regarded portfolio brand. The supervisor believes that it is an opportune time for the subject LLC to take advantage of the opportunity to participate in the consolidation which will afford the subject LLC the administrative and operating efficiencies, as well as better value protection through diversification. Additionally, the supervisor believes the consolidation provides value enhancement through better access to capital and options for liquidity for investors who so desire.

The supervisor believes that the consolidation of your subject LLC into the company is the best way for you to maximize the value of your investment in your subject LLC and to achieve liquidity through ownership of shares of Class A common stock expected to be listed on the NYSE, which investors may sell from time to time as and when they so desire (subject to the restrictions of applicable U.S. federal and state securities laws and after expiration of the lock-up period as described in this prospectus/consent solicitation). The supervisor believes that in view of the fact that the subject LLCs own the interests in the properties, but the operating lessees operate the properties, it would not be in the best interests of the subject LLCs to sell their interests in the properties separate from a sale by the operating lessees. The private entities (including the operating lessees), with the required consent of their participants, have agreed to transfer their interests in the properties, including their interests in the operating lessees, as part of the consolidation. The supervisor believes that the consolidation, over time, likely will result in higher values for participants in the subject LLCs than if the interests in the properties were sold individually and the subject LLCs were liquidated as a result of increased efficiencies, growth opportunities and other opportunities for value enhancement. The Malkin Holdings group will receive substantial benefits from the consolidation and have conflicts of interest in making this recommendation.

Benefits of Participation in the Consolidation

The supervisor believes that the consolidation will provide you with the following benefits:

 

   

Liquidity. You will be able to achieve liquidity by selling all or part of your shares of Class A common stock, subject to the restrictions of applicable U.S. federal and state securities laws and after expiration of the lock-up period described under “The Consolidation—Lock-Up Agreement.” The shares of Class A common stock are expected to be listed on the NYSE;

 

   

Regular Quarterly Cash Distributions. Similar to the subject LLCs’ present method of operation, the supervisor expects that the company will make regular quarterly cash distributions on its common stock, which will include distributions of at least 90% of the company’s annual REIT taxable income (determined without regard to the deduction for dividends paid and excluding net capital gains), which is required for REIT qualification. If the company is successful in making acquisitions, the supervisor believes that the additional properties and related cash flow will enhance its ability to make distributions quarterly and in regular amounts;

 

   

More Efficient Decision-Making. Each subject LLC currently requires several internal procedural steps to undertake major transactions, which affects its ability to take timely advantage of favorable opportunities. Financing and sales require costly and time consuming steps to obtain consent of a very high percentage of the participants in a subject LLC;

 

 

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Improved Capital Structure by Eliminating Two-Tier Ownership. Except for very small loans supported by basic rent, the relationship between the subject LLCs and the operating lessees requires that any additional financing placed on an entire property requires the agreement of both the operating lessee and the subject LLCs.

A subject LLC cannot require the operating lessee to obtain or utilize financing to maximize its cash flow and therefore overage rent available for additional distributions to participants in the subject LLCs. Each operating lessee controls all aspects of property operations, leasing, and investment and has broad discretion to use cash flow from the property for purposes related to the applicable property. Operating lessee decisions can result in little or no overage rent to the corresponding subject LLC, and additional distributions to the subject LLC’s participants are contingent on overage rent.

In the past, decisions by operating lessees have resulted in uneven payments of overage rent to the subject LLCs from year to year. Without the cooperation of the operating lessee, there is very limited opportunity for financing by the subject LLCs to provide funds for distributions. It is likely that any lender would require agreement of the operating lessee before making any loan to a subject LLC.

Additionally, the operating leases between the subject LLCs and the operating lessees do not address reinvestment by the operating lessees in capital improvements for the properties. To induce reinvestment by their operating lessees, two of the subject LLCs (60 East 42nd St. Associates L.L.C. and 250 West 57th St. Associates L.L.C.) have agreed, in accordance with their participants’ consent and the supervisor’s recommendation, to extend the operating leases. These extensions have been coupled with consents by the operating lessees to allow financing on the entire property, which minimized the impact of reinvestment on operating profit and allowed for additional distributions from overage rent.

In connection with these extension and financing agreements, the basic rent has been increased by the amount of the increase in debt service arising from the financing, and such increase in basic rent is deducted in calculating overage rent, ultimately resulting in the debt service being shared 50/50 between each such subject LLC and its operating lessee. In the case of the Empire State Building, because of the pendency of this proposed consolidation, there has been no such lease extension request, though the operating lessee has consented to limited advances under a property mortgage loan made to Empire State Building Associates L.L.C. and has subordinated the operating lease to such advances. If the consolidation does not go forward, the operating lessee has indicated it will request additional lease extensions as a condition for subordination to additional mortgage advances at that time.

Finally, as described under “Background of and Reasons for the Consolidation—The Supervisor’s Reasons for Proposing the Consolidation,” the supervisor believes that, unless the operating lessee joins with the corresponding subject LLC in a sale of the property, such a sale would not maximize the value of the such subject LLC’s interests in the property.

The company, on the other hand, will have a modern governance structure. Capital reinvestment and financing decisions will be based on what is considered to be best for the company, and there will be no need to secure approvals of operating lessees or subject LLCs. Such decisions will be made under a corporate governance structure governed by a board of directors, with six of seven directors being independent.

On this basis, the supervisor expects that the company will make regular quarterly cash distributions on its common stock, which will include distributions of at least a minimum of 90% of the company’s annual REIT taxable income (determined without regard to the deduction for dividends paid and excluding any net capital gains), as required for REIT qualification. Such distributions will be based on a portfolio of properties, rather than investors’ being dependent on a single property;

 

   

Increased Accountability. As a result of the governance structure of a company with its Class A common stock expected to be listed on the NYSE, stockholders will benefit from the oversight by a board of directors consisting predominantly of independent directors.

 

 

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Greater and More Efficient Access to Capital. The company will have a larger base of assets and believes that it will have a greater variety of options and ability to access the capital markets and the equity value in its assets than any of the subject LLCs individually. As a result, the company expects to have greater and more efficient access to the capital necessary to fund its operations, fund renovations to the properties and consummate acquisitions than would be available to any of the subject LLCs individually. The supervisor believes that it would be extremely difficult for the subject LLCs to obtain similar access to capital due to their size and ownership structure;

 

   

Growth Potential. The supervisor believes that you have greater potential for increased distributions as a stockholder and increased value from capital appreciation than as a participant in your subject LLC. The supervisor’s belief is based on the anticipated growth in the revenues of the initial properties operated as a portfolio under the Malkin brand and potential additional investments by the company;

 

   

Elimination of Risk from Subject LLCs’ Passive Ownership of the Property Interests. Each subject LLC owns an interest in a single property subject to an operating lease. The operating lessee operates the property and the subject LLC does not participate in the management of the operations of the property. The market for the interest held by each subject LLC is smaller and the interest less valuable than of the entire property not subject to the operating lease. Following the consolidation, ownership and operation of the properties owned by the subject LLCs and private entities will be integrated;

 

   

Risk Diversification. The company will own a larger number of properties and have broader types of properties and tenants than your subject LLC, which owns an interest in a single property. This diversification will reduce the dependence of your investment upon the performance of, and the exposure to the risks associated with, owning an interest in a single property;

 

   

Valuable Synergies. The subject LLCs presently benefit from being part of a portfolio of properties with a common brand awareness. However, under the current structure, there are major obstacles to obtaining true synergies and realization of value, such as combining financings, movements of tenants from one building to another, sharing of employees and management and oversight. The consolidation will remove such obstacles and free up access to value creation;

 

   

Position in Highly Desirable Marketplace. The properties owned by the subject LLCs and the private entities are concentrated in Manhattan and the greater New York metropolitan area. The supervisor believes this is one of the most highly desired markets in the world for office and retail properties;

 

   

Reduced Conflicts of Interest. From inception, the supervisor has represented many different ownership interests, and the subject LLCs and the private entities, therefore, have been exposed to conflicts of interest. For example, the supervisor and persons associated with the supervisor act as an external manager for all of the entities (including the subject LLCs and the operating lessees), serve as agents for the participants in the subject LLCs and certain of the private entities, determine when to make recommendations on sales, financings and operations of the properties, and make or recommend all operating and leasing decisions in all operating entities and all decisions of the subject LLCs. Decisions made by the supervisor in its capacity as supervisor of the operating lessees with regard to property operations dictate the cash available for distribution to the subject LLCs, which are also supervised by the supervisor. The company, on the other hand, will be managed by its officers, subject to the direction and control of its board of directors, which will consist predominantly of independent directors, and all the properties will be owned directly or indirectly by a single entity, without a division of interests. There will not be separate interests of different groups of owners and there will not be a role for, or requirement of, an outside supervisor. Accordingly, the supervisor believes this consolidated structure eliminates the conflicts inherent in the structure which have been there from inception of the subject LLCs and the private entities and more closely aligns the interests among the stockholders and management; and

 

 

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Election to Receive Cash. Each participant in a subject LLC may elect to receive cash consideration in lieu of a portion of the Class A common stock otherwise issuable in the consolidation (at a price per share equal to the IPO price reduced by the underwriting discount per share paid by the company in the IPO), if the consolidation is approved and consummated by such subject LLC, provided that the aggregate cash consideration paid to participants in such subject LLC will not exceed [12-15%] of the aggregate consideration payable to all participants in such subject LLC (excluding the Wien group). The Wien group will not receive cash consideration in the consolidation at the time of the IPO and will therefore not be entitled to make any such cash election. Thus, if any participant does not make a cash election or makes a cash election for less than [12-15%] of the consideration payable to such participant in respect of such subject LLC, the excess will be allocated among the other electing participants in such subject LLC in proportion to their participation interests to the extent they elect to receive additional cash consideration. Such [12-15%] limit on the cash elections in a subject LLC is designed to assist the company in meeting the conditions for obtaining a reduced rate of transfer tax in New York City and New York State for transfers to qualifying REITs. The supervisor believes such reduction may be partially available for property transfers to the operating partnership as part of the consolidation. In addition, after the consolidation and the IPO, each participant (except the Malkin Family) will have the ability to sell up to half of the balance of such participant’s consideration (i.e., 50% of the Class A common stock received in the consolidation after the cash election) at any time after the 180th day following the IPO pricing date; provided that if the IPO occurs on or before December 31, 2012, each such participant in the subject LLCs (except the Helmsley estate) instead will have an earlier ability to sell up to between 19.5% (if the cash election limit is 12%) and 17% (if the cash election limit is 15%) of such Class A common stock received in the consolidation on or after April 1, 2013 to provide liquidity for income tax payments due on April 15, 2013 and an additional 30.5%-33% (resulting in an aggregate of 50%) of such Class A common stock received in the consolidation on or after such 180th day. The cash election, together with such ability to sell shares of Class A common stock, based upon a sale at or above the IPO price, is intended to provide a participant who is a U.S. individual with the ability to obtain an amount of cash sufficient to pay his or her U.S. federal, state, and local income taxes.

Third-Party Portfolio Transaction

As a potential alternative to the consolidation, you also are being asked to consent to the sale or contribution of the subject LLC’s property interest as part of a sale or contribution of the properties owned by the subject LLCs and the private entities as a portfolio to a third party. Through solicitation of consents, for the first time the properties owned by the subject LLCs and the private entities can be joined as a single portfolio. While the supervisor believes the consolidation and IPO represent the best opportunity for participants in the subject LLCs and the private entities to achieve liquidity and to maximize the value of their respective investments, the supervisor also believes it is in the best interest of all participants for the supervisor to be able to approve offers from unaffiliated third parties for the portfolio as a whole.

Market forces are dynamic, unpredictable, and subject to volatility. Should the public awareness of the proposed consolidation and IPO produce potential compelling offers from unaffiliated third parties to purchase the consolidated portfolio, it will be costly and time consuming to solicit consents to allow a sale or contribution of the portfolio to a third party, and there is considerable risk that any opportunity which might appear would be lost without the requested consent in place. Therefore, the supervisor believes that it is advisable to have the flexibility and discretion, subject to certain conditions, to accept an offer for the entire portfolio of properties from a third party, rather than pursue the consolidation and IPO.

The third-party portfolio transaction would be undertaken only if the supervisor determines that the offer price includes what the supervisor believes is an adequate premium above the value that is expected to be realized over time from the consolidation, subject to the committee approval described below, and would apply

 

 

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only to an offer from an unaffiliated third-party for the entire portfolio of properties owned by all of the subject LLCs and all of the private entities, subject to exclusions described under the section entitled “Third-Party Portfolio Proposal.” A third-party portfolio transaction also could include the management companies.

Because of the inability to act without consent of the subject LLCs and certain of the private entities, the supervisor intends to inform any unaffiliated third-party which expresses interest in making a third-party offer that it will not consider any offer until after completion of the solicitation of consents of the subject LLCs. If an offer is submitted during the solicitation period, the supervisor may be required to provide information regarding the proposal to participants, to assist them in their decision regarding the consolidation.

The supervisor has agreed that it will not accept a third-party offer unless it is unanimously approved by a committee which will include representatives of the supervisor and a representative of the Helmsley estate. Any third-party interested in making a portfolio proposal will be instructed to make its offer for all cash. It is possible that participants or the supervisor and its affiliates may be offered an option to receive securities in lieu of all or a portion of the cash. The supervisor will be authorized to approve offers only if a definitive agreement is entered into prior to December 31, 2015 or such earlier date as the supervisor may set with or without notice or public announcement.

Risk Factors

The Consolidation or a Third-Party Portfolio Transaction

The following is a summary of the material risks of the consolidation and the third-party portfolio transaction. The risks are more fully discussed in “Risk Factors.” The supervisor believes that the risks described hereunder have substantially the same effect on each of the subject LLCs. You should consider these risks in determining whether or not to vote “FOR” the consolidation proposal or the third-party portfolio proposal.

 

   

The fair market value of the consideration that you receive will not be known until the pricing of the IPO. The valuation of the shares of Class A common stock that you will receive in the consolidation, as presented in this prospectus/consent solicitation, is based on the exchange value of your subject LLC and the aggregate exchange value. These exchange valuations were based on the Appraisal by the independent valuer. The enterprise value will be determined by the market conditions and the performance of the portfolio at the time of the IPO. The enterprise value may be higher or lower than the aggregate exchange value. The exchange value used herein is based on the Appraisal prepared by the independent valuer. Historically, in a typical initial public offering of a REIT, the enterprise value and initial public offering price are at a discount to the net asset value of the REIT’s portfolio of properties, which in turn may be above or below the aggregate exchange value;

 

   

The participants will not know at the time they vote on the consolidation the size, makeup and leverage of the company or the exact number of shares of Class A common stock that the participants in the subject LLCs will receive in the consolidation. The consolidation is conditioned on the participation of Empire State Building Associates L.L.C. and Empire State Building Company L.L.C., the private entity which owns an interest in the Empire State Building participating in the consolidation but is not conditioned on any of the other subject LLCs or private entities participating in the consolidation. Each subject LLC represents a significant portion of the exchange value and anticipated future net income and cash flow of the company;

 

   

The supervisor arbitrarily has assigned $10 as the hypothetical value of each share of Class A common stock for purposes of illustrating the number of shares of common stock and operating partnership units that will be issued to each of the subject LLCs, the private entities and the management companies in the consolidation. The IPO price of the Class A common stock may be below the hypothetical $10 per share;

 

 

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After the consolidation and completion of the IPO, your investment will be subject to market risk and the trading price of the Class A common stock may fluctuate significantly and may trade at prices below the IPO price. Your ability to sell shares of Class A common stock will be subject to the restrictions of applicable U.S. federal and state securities laws and subject to the lock-up period described herein;

 

   

The value of the shares of Class A common stock to be received by the participants in connection with the consolidation may be less than the fair market value of the participants’ participation interests in the subject LLCs;

 

   

The consolidation of your subject LLC into the company involves a fundamental change in the nature of your investment, including:

 

   

You no longer will hold a participation interest in a subject LLC that owns an interest in a single property subject to an operating lease located in Manhattan. Instead, you will own shares of Class A common stock in the company if the consolidation is consummated, which will own a portfolio of office and retail assets in Manhattan and the greater New York metropolitan area. The company will own, and in the future may invest in, types of properties different from those in which your subject LLC has invested, and you may be subject to increased risk because of the larger number of properties and broader types of properties held by the company;

 

   

Historically, the supervisor generally has not reinvested the proceeds from a sale of properties by investment programs that it supervises, although it is not restricted from doing so. Net proceeds which are not reinvested or reserved in the supervisor’s discretion would be distributed to the participants in accordance with each subject LLC’s organizational documents. As the company expects to reinvest the proceeds from sales of its properties, you likely will not receive a distribution of any such proceeds, and such reinvestments may be made in properties that are not profitable;

 

   

While the participants in Empire State Building Associates L.L.C. in 2008 authorized the supervisor to obtain financing to invest in properties, none of the subject LLCs has acquired any additional properties. The company may raise additional funds through equity or debt financings to make future acquisitions of properties. You may be subject to the risk that the company’s future issuances of debt or equity securities or the company’s other borrowings will reduce the market price of the company’s shares of Class A common stock and dilute your ownership in the company;

 

   

You will have different voting rights as a result of the consolidation. As a holder of participation interests in a subject LLC, you generally have voting rights only on the sale, mortgage or transfer of the interest in the property, modification of the existing lease on the property held by your subject LLC or entry into a new lease affecting your subject LLC. As a stockholder of the company, you will have voting rights that permit you to elect the board of directors and to approve certain major actions such as mergers and sales of all or substantially all of the assets of the company. Such voting rights do not include the right to consent to a financing;

 

   

As a result of the consolidation, you will no longer own a participation interest in your subject LLC which entitles you to a pro rata share of distributions made to participants in your subject LLC derived from cash flow from operations or cash flow from sales or financings. Your subject LLC makes small regular monthly distributions and annual distributions out of overage rent to the extent paid under the operating lease, in each case, to the extent of available cash flow. You will hold shares of Class A common stock in the company, which will entitle you to a per share amount of dividends and distributions paid with respect to the Class A common stock (which are expected to be paid quarterly and include distributions of at least 90% of the company’s annual REIT taxable income (determined without regard to the deduction for dividends paid and excluding net capital gains), as is required for the company’s continued REIT qualification), if, as and when declared by the board of directors of the company. The amount of such dividends and distributions and the timing thereof will be established by the board of directors; and

 

 

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As a result of the consolidation, the Malkin Holdings group and its affiliates will no longer receive supervisory fees and distributions on account of their participation interests and override interests. Certain executives of the supervisor will become officers, and one executive of the supervisor will become a director, of the company, and will receive customary salaries, bonuses and benefits as determined by the company’s board of directors, in addition to dividends and distributions payable to the Malkin Holdings group in respect of shares of common stock and operating partnership units they hold.

 

   

While the subject LLCs’ exchange values have been determined based on the Appraisal by the independent valuer, which has also delivered a fairness opinion, no independent representative was retained to negotiate on behalf of the participants. There are 23 subject LLCs and private entities and groups with different interests in many of these entities. The supervisor does not believe that a single independent representative could have represented the interests of all participants and believes that to locate and retain an independent and equally competent and qualified representative for each separate interest in the consolidation is not possible. The supervisor represents the interests of all participants in the subject LLCs and private entities. The supervisor has served the same role in the past for sales of other properties with different groups of participants and believes it is not required to retain any independent representative on behalf of each group of participants or all of the participants as a whole. The supervisor believes the Appraisal prepared by the independent valuer serves the purposes of representing all parties fairly and that the consolidation is fair to all participants regardless of the absence of any such independent representative. If a representative or representatives had been retained for the participants, the terms of the consolidation might have been different and, possibly, more favorable to the participants;

 

   

While the independent valuer appraised each property, the independent valuer’s fairness opinion addressed only the allocation of consideration (Class A common stock, Class B common stock, operating partnership units or cash consideration) (i) among the subject LLCs, the private entities and the management companies and (ii) to the participants in each subject LLC and each private entity (without giving effect to any impact of the consolidation on any particular participant other than in its capacity as a participant in each of the subject LLCs and each of the private entities);

 

   

The independent valuer’s fairness opinion cannot address the market value of the Class A common stock you will receive, which can only be set by the market value at the time the IPO is consummated or the amount of cash participants may receive;

 

   

For each subject LLC, approval of the consolidation by the requisite vote of the participants will cause the subject LLC to participate in the consolidation, whether you vote “FOR” or “AGAINST” the consolidation;

 

   

The organizational documents provide that if more than a specified percentage of participation interests in Empire State Building Associates L.L.C. and 60 East 42nd St. Associates L.L.C. approve an action, the agents may purchase on behalf of the subject LLC the participation interests of participants who do not approve such action, and that price would be substantially below the exchange value of the participation interests. If the required supermajority consent of the participation interests in a subject LLC approves the consolidation, an agent’s participating group will purchase on behalf of the subject LLC the participation interests of the participants that do not approve the consolidation, at a price substantially below the exchange value of the participation interests;

 

   

If the required percentage of participation interests in a subject LLC approves the consolidation and the subject LLC is consolidated with the company, the subject LLC no longer can enter into alternatives to the consolidation. These alternatives include (i) continuation of the subject LLC and (ii) a sale of the subject LLC’s interest in the property followed by the distribution of the net proceeds to its participants;

 

 

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From inception, the supervisor has represented many different ownership interests, and the subject LLCs and the private entities, therefore, have been exposed to conflicts of interest. For example, the supervisor and persons associated with the supervisor act as an external manager for all of the entities (including the subject LLCs and operating lessees), serve as agents for the participants in the subject LLCs and certain of the private entities, determine when to make recommendations on sales, financings and operations of the properties, and make or recommend all operating and leasing decisions in all operating entities and all decisions of the subject LLCs. Decisions made with regard to property operations dictate the cash available for distribution to the subject LLCs;

 

   

The Malkin Holdings group will receive shares of Class A common stock and Class B common stock and operating partnership units which are redeemable for cash or, at the company’s election, Class A common stock, having an aggregate value of $641,745,376, which they will receive in accordance with the allocation of exchange value based on the Appraisal. The amounts allocated to the Malkin Holdings group are based on the hypothetical $10 per share exchange value that the supervisor arbitrarily assigned for illustrative purposes, and consists of: their interests as participants which will be allocated to them on the same basis as other participants; their interests as holders of override interests which will be allocated to them in accordance with the subject LLCs’ and private entities’ organizational documents; and their interests in the management companies, which will be allocated to them in accordance with the valuations of the management companies by the independent valuer. This is in addition to shares of Class A common stock issuable in respect of the voluntary pro rata reimbursement program consented to by participants in the subject LLCs and its share of distributions of any cash available for distribution from the subject LLCs prior to the consolidation. The Malkin Holdings group also will receive other benefits from the consolidation, and have interests that conflict with those of the participants. See “—Conflicts of Interest and Benefits to the Supervisor and its Affiliates.”

 

   

You generally will recognize gain or loss for U.S. federal income tax purposes with respect to your participation interest equal to the amount by which the sum of any cash and the value of any shares of Class A common stock you receive in connection with the consolidation, plus the amount of liabilities allocable to your participation interest, exceeds your tax basis in your participation interest. You will recognize “phantom income” (i.e., income in excess of any cash and the value of any shares of Class A common stock you receive) if you have a “negative capital account” with respect to your participation interest. The supervisor urges you to consult with your tax advisor to evaluate the tax consequences to you in your particular circumstances as a result of the consolidation. Each participant in a subject LLC (except the Malkin Family) has the right to elect to receive cash consideration in the consolidation (subject to the limits noted herein), and the ability to sell up to 50% of the Class A common stock received in the consolidation at any time after the 180th day following the IPO pricing date; provided that if the IPO occurs on or before December 31, 2012, each such participant in the subject LLCs (except the Helmsley estate) instead will have an earlier ability to sell up to between 19.5% (if the cash election limit is 12%) and 17% (if the cash election limit is 15%) of such Class A common stock received in the consolidation on or after April 1, 2013 to provide liquidity for income tax payments due on April 15, 2013 and an additional 30.5%-33% (resulting in an aggregate of 50%) of such Class A common stock received in the consolidation on or after such 180th day. The cash election, together with such ability to sell shares of Class A common stock, based upon a sale at or above the IPO price, is intended to provide a participant who is a U.S. individual with the ability to obtain an amount of cash sufficient to pay his or her U.S. federal, state, and local income taxes;

 

   

The participants in the subject LLCs will have different U.S. federal income tax and other tax consequences from the tax consequences of participants in the private entities and the Wien group. The participants in the subject LLCs will be issued shares of Class A common stock and/or cash in taxable transactions. The Wien group will receive operating partnership units and/or shares of Class A common stock and/or Class B common stock in transactions that are intended to qualify, in whole or in part, as

 

 

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tax deferred transactions for U.S. federal income tax purposes. The participants in the private entities also will receive operating partnership units and/or shares of Class A and/or Class B common stock in transactions that are intended to qualify, in whole or in part, as tax deferred transactions for U.S. federal income tax purposes;

 

   

The supervisor may not approve a third-party portfolio transaction even if it provides for more consideration than to be issued or paid pursuant to the consolidation. The supervisor does not expect that it would approve a third-party portfolio transaction unless the supervisor believes it is an adequate premium above the value expected to be realized over time from the consolidation. The supervisor has agreed that it will not accept a third-party offer unless it is unanimously approved by a committee which will include representatives of the supervisor and a representative of the Helmsley estate;

 

   

If the required percentage of the participants consent to the third-party portfolio proposal, participants in Empire State Building Associates L.L.C. and 60 East 42nd St. Associates L.L.C. who voted “AGAINST” the third-party portfolio proposal, did not return a consent form or “ABSTAINED” will be bought out regardless of whether there is a third-party portfolio offer at a price substantially below the exchange value of their participation interests;

 

   

At the time you vote on the third-party portfolio proposal, there will be significant uncertainties as to the terms of any third-party portfolio transaction, which may not be received until after the consent solicitation has been completed, including the amount of consideration you would receive if a third-party portfolio transaction is consummated. These uncertainties affect your ability to evaluate the third-party portfolio proposal. The supervisor may approve a third-party portfolio transaction which you may view as less favorable than the consolidation; and

 

   

The supervisor, the agents and their affiliates serve in their respective capacities with respect to each subject LLC and each private entity, and, as such, have conflicts of interest in connection with decisions concerning the terms of a third-party portfolio transaction.

Ownership of Shares of Common Stock in the Company

The following is a summary of the material risks of ownership of shares of common stock in the company.

 

   

There is no assurance as to the amount or source of funds for the estimated initial cash distributions of the operating partnership or the company, and the expected initial cash distributions to the participants following the consolidation could be less than the estimated cash distributions participants would receive from their respective subject LLCs;

 

   

All of the company’s properties are located in Manhattan and the greater New York metropolitan area, in particular midtown Manhattan, and adverse economic or regulatory developments in this area could materially and adversely affect the company;

 

   

Adverse economic and geopolitical conditions in general and in Manhattan and the greater New York metropolitan area commercial office and retail markets in particular, could have a material adverse effect on the company’s results of operations, financial condition and its ability to make distributions to its stockholders;

 

   

There can be no assurance that the company’s renovation and repositioning program will be completed in its entirety in accordance with the anticipated timing or at the anticipated cost, or that the company will achieve the results it expects from the renovation and repositioning program, which could materially and adversely affect the company’s financial condition and results of operations;

 

   

The company may be unable to renew leases, lease vacant space or re-lease space on favorable terms as leases expire, which could materially and adversely affect the company’s financial condition, results of operations and cash flow;

 

   

The company is exposed to risks associated with property redevelopment and development that could materially and adversely affect its financial condition and results of operations;

 

 

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The company depends on significant tenants in its office portfolio, including LF USA, Legg Mason, Warnaco, Thomson Reuters and the Federal Deposit Insurance Corporation, which together represented approximately 18.3% of the company’s total portfolio’s annualized base rent as of December 31, 2011;

 

   

The company’s dependence on rental income may materially and adversely affect its profitability, its ability to meet its debt obligations and its ability to make distributions to its stockholders;

 

   

The company’s option properties are subject to various risks, and the company may not be able to acquire them;

 

   

Competition for acquisitions may reduce the number of acquisition opportunities available to the company and increase the costs of those acquisitions, which may impede the company’s growth;

 

   

The observatory operations at the Empire State Building are not traditional real estate operations, and competition and changes in tourist trends may subject the company to additional risks;

 

   

The broadcasting operations at the Empire State Building are not traditional real estate operations, and competition and changes in the broadcasting of signals over air may subject the company to additional risks, which could materially and adversely affect the company;

 

   

The company’s outstanding indebtedness upon completion of the IPO reduces cash available for distribution and may expose the company to the risk of default under its debt obligations;

 

   

The continuing threat of a terrorist event may materially and adversely affect the company’s properties, their value and the ability to generate cash flow;

 

   

The company may assume unknown liabilities in connection with the consolidation, which, if significant, could materially and adversely affect its business;

 

   

The departure of any of the company’s key personnel could materially and adversely affect the company;

 

   

The company’s Chairman, Chief Executive Officer and President has outside business interests that will take his time and attention away from the company, which could materially and adversely affect the company;

 

   

The company’s operating performance and value are subject to risks associated with real estate assets and the real estate industry, the occurrence of which could materially and adversely affect the company;

 

   

The company has no operating history as a REIT or as a publicly-traded company and its lack of experience could materially and adversely affect the company;

 

   

Certain provisions of Maryland law could inhibit changes in control of the company, which could negatively affect the market price of the Class A common stock;

 

   

There will be no public market for the Class A common stock prior to the IPO and an active trading market may not develop or be sustained following the IPO, which may negatively affect the market price of shares of the Class A common stock and make it difficult for investors to sell their shares;

 

   

Cash available for distribution may not be sufficient to make distributions at expected levels;

 

   

Failure of the company to qualify or remain qualified as a REIT would subject the company to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of cash available for distribution to the company shareholders; and

 

   

The REIT distribution requirements could require the company to borrow funds during unfavorable market conditions or subject the company to tax, which would reduce the cash available for distribution to the stockholders.

 

 

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Conflicts of Interest and Benefits to the Supervisor and its Affiliates

From inception of the subject LLCs, the supervisor, the agents of the subject LLCs and their respective affiliates and related persons have served as supervisor, agents for groups of participants or in a similar capacity with respect to each subject LLC and each private entity with conflicts of interest and as such have conflicts of interest in connection with the consolidation. The supervisor and its affiliates will receive benefits as a result of the consolidation or a third-party portfolio transaction. These benefits and conflicts include:

 

   

The Malkin Holdings group will receive 64,174,538 shares of Class A common stock, Class B common stock and operating partnership units, which they will receive in accordance with the allocation of exchange value based on the Appraisal by the independent valuer. The amounts allocated to the Malkin Holdings group are based on the hypothetical $10 per share exchange value that the supervisor arbitrarily assigned for illustrative purposes, and consists of: their interests as participants which will be allocated to them on the same basis as other participants; their interests as holders of override interests which will be allocated to them in accordance with the subject LLCs’ and private entities’ organizational documents; and their interests in the management companies, which will be allocated to them in accordance with the valuations of the management companies by the independent valuer. This is in addition to shares of Class A common stock issuable in respect of the voluntary pro rata reimbursement program consented to by participants in the subject LLCs and its share of distributions of any cash available for distribution from the subject LLCs prior to the consolidation;

 

   

The amounts received by the supervisor and the Malkin Holdings group in respect of the override interests and participation interests generally will be in the form of operating partnership units instead of shares of Class A common stock. In addition, the shares of common stock and operating partnership units issued to the Malkin Family in respect of their interests in the management companies are also intended to be issued on a tax deferred basis. As a result, unlike other holders of participation interests in the subject LLCs, the supervisor and its affiliates will receive their interests in what are expected to be tax-deferred transactions;

 

   

Following the consolidation, certain executives of the supervisor will be members of the senior management team and Anthony E. Malkin, an executive and principal of the supervisor, will be Chairman, Chief Executive Officer, President and a director of the company;

 

   

The company intends to enter into an employment agreement with Anthony E. Malkin providing for salary, bonus and other benefits, including severance upon a termination of employment under certain circumstances as described under “Management—Employment Agreement,” and it is expected that other members and officers of the supervisor will be officers and employees of the company;

 

   

Members, managers and officers of the supervisor, who will be employed by the company, will be indemnified by the company for certain liabilities and expenses incurred as a result of actions brought, or threatened to be brought, against them for actions taken as officers and as a director of the company and for actions taken on behalf of the supervisor and other management companies, in their capacities as such, including actions relating to the consolidation;

 

   

As part of the consolidation, the operating partnership intends to enter into a tax protection agreement with Peter L. Malkin and Anthony E. Malkin pursuant to which the operating partnership will agree to indemnify the Wien group and an additional third party investor in Metro Center (who was one of the original landowners and was involved in the development of the property) against certain tax liabilities if those tax liabilities result from (i) the operating partnership’s sale, transfer, conveyance or other taxable disposition of four specified properties (First Stamford Place, Metro Center, 10 Bank Street and 1542 Third Avenue, which collectively represent approximately 1.6% of the aggregate exchange value) to be acquired by the operating partnership in the consolidation, for a period of 12 years with respect to First Stamford Place and for the later of (x) eight years or (y) the death of both of Peter L. Malkin and

 

 

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Isabel W. Malkin, who are 78 and 75 years old, respectively, for the three other properties, (ii) the operating partnership’s failing to maintain until maturity the indebtedness secured by these properties or failing to use commercially reasonable efforts to refinance such indebtedness upon maturity in an amount equal to the principal balance of such indebtedness, or, if the operating partnership is unable to refinance such indebtedness at its current principal amount, at the highest principal amount possible, or (iii) the operating partnership’s failing to make available to any of these investors the opportunity to guarantee, or otherwise bear the risk of loss, for U.S. federal income tax purposes, of their allocable share of $160 million of aggregate indebtedness meeting certain requirements, until such investor owns less than the aggregate number of operating partnership units and shares of common stock equal to 50% of the aggregate number of such units and shares such investor received in the consolidation. The company believes that it is consistent with market practice for significant contributing unitholders, such as the Malkin Group and the one additional third party investor in Metro Center, to be indemnified against certain tax liabilities as set forth in the tax protection agreement. Accordingly, the company believes it is appropriate to enter into a tax protection agreement. The operating partnership estimates that if all of its assets subject to the tax protection agreement were sold in a taxable transaction immediately after the IPO, the amount of the operating partnership’s indemnification obligations (based on tax rates applicable for the taxable year ending December 31, 2012, and exchange values, and including additional payments to compensate the indemnified partners for additional tax liabilities resulting from the indemnification payments) would be approximately $84.7 million.

 

   

The company will release (i) Anthony E. Malkin and Peter L. Malkin from all claims, liabilities, damages and obligations against them related to their ownership of interests in any of the subject LLCs or the private entities and (ii) certain members of the company’s senior management team who were officers or employees of the supervisor from all claims, liabilities, damages and obligations against them related to their ownership in the subject LLCs, the private entities and the management companies and their employment with the management companies that exist at the closing of the consolidation, other than breaches by them or entities related to them, as applicable, of the employment and non-competition agreement and the contribution agreements and the merger agreements entered into by them and these entities in connection with the consolidation;

 

   

Peter L. Malkin and Anthony E. Malkin will be released from or otherwise indemnified for liabilities arising under certain guarantees and indemnities with respect to approximately $1.12 billion of mortgage loans (including currently undrawn amounts) on the company’s properties, which will be assumed by the company upon closing of the IPO and the consolidation in respect of obligations arising after the closing. The guarantees and indemnities with respect to mortgage loans of many of the existing entities, including the subject LLCs, were undertaken by Messrs. Malkin and Malkin to meet a conventional lender requirement which became standard only long after such entities were formed. The guarantees and indemnities with respect to all of the indebtedness are, in most instances, limited to losses incurred by the applicable lender arising from acts such as fraud, misappropriation of funds, intentional breach, bankruptcy and certain environmental matters. In connection with the company’s assumption of these mortgage loans, it will seek to have the guarantors released from these guarantees and indemnities and to have the company’s operating partnership assume any such guarantee and indemnity obligations as replacement guarantor and/or indemnitor. To the extent lenders do not consent to the release of these guarantors and/or indemnitors, and they remain guarantors and/or indemnitors on assumed indebtedness following the IPO and the consolidation, the company’s operating partnership will enter into indemnification agreements with the guarantors and/or indemnitors pursuant to which the company’s operating partnership will be obligated to indemnify such guarantors and/or indemnitors for any amounts paid by them under guarantees and/or indemnities with respect to the assumed indebtedness. The company believes that since the mortgage loans relating to the guarantees and indemnities will be assumed by the company upon closing of the consolidation, and it will have greater financial resources than the individual property owning entities which are subject to the mortgage

 

 

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loans, it is appropriate, and consistent with market practice, for Messrs. Malkin and Malkin to be indemnified by the company’s operating partnership if the lenders do not consent to the release of these guarantors and/or indemnitors. Under the organizational documents of the subject LLCs and private entities and applicable law, Messrs. Malkin and Malkin are already generally entitled to indemnification from the participants in the subject LLCs and the private entities for liabilities incurred by them in good faith and not arising out of their own willful misconduct or gross negligence, including any such liabilities under these guarantees and indemnities. In addition, in connection with future mortgage loans that the company would enter into in connection with future property acquisitions or refinancing of the company’s properties, the company intends to enter into any necessary guarantees directly, and neither Messrs. Malkin and Malkin nor any of the company’s other directors, executive officers or stockholders would be expected to enter into such guarantees;

 

   

The supervisor and the Malkin Family may hold a greater interest (including their share of distributions in respect of the override interests) in other subject LLCs or private entities than in your subject LLC, including, in the case of 250 West 57th St. Associates L.L.C., the private entity which is the operating lessee of the property it owns. Accordingly, they would be benefited to the extent that a greater portion of the exchange value is allocated to other subject LLCs or private entities than to your subject LLC;

 

   

After the consolidation, the company intends to enter into management agreements with the entities that own interests in the excluded properties and excluded businesses, which entities are owned in part by Anthony E. Malkin. There may be conflicts of interest in the allocation of his time between the company and his other interests;

 

   

The operating partnership has entered into option agreements with three private entities controlled by the supervisor;

 

   

The company intends to enter into management agreements with the entities that own long-term leasehold, sub-leasehold and/or sub-subleasehold interests in the option properties, which entities are owned in part by Anthony E. Malkin, together with members of the Malkin Family and supervised by the supervisor;

 

   

Affiliates of the supervisor also will retain interests in the option properties, certain other properties to which the company will provide management services and certain excluded businesses. Affiliates of the supervisor are subject to conflicts of interest in connection with the terms of these arrangements;

 

   

Effective upon consummation of the consolidation, the company expects to grant long-term incentive plan units and/or restricted shares of Class A common stock, subject to certain vesting requirements to each of its executive officers, including officers of the supervisor;

 

   

The supervisor and its affiliates may have a conflict of interest in deciding whether to approve a third-party portfolio transaction and with respect to the terms of the third-party portfolio transaction due to the benefits that the Malkin Holdings group could receive in that transaction and

 

   

The Malkin Family could receive tax benefits from a third-party portfolio transaction that are more favorable than those received by other participants.

 

 

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The Consolidation

Principal Components of the Consolidation

The consolidation will consist of the following principal components:

 

   

The subject LLCs that approve the consolidation will contribute their assets to the operating partnership or subsidiaries of the operating partnership. As a result, the company will own an interest in each subject LLC’s property indirectly through its ownership of the operating partnership, and the operating partnership or its subsidiaries generally will assume each subject LLC’s liabilities. The company will issue Class A common stock to the participants in the subject LLCs (other than the supervisor and the Wien group who will receive operating partnership units and Class B common stock). Each participant in a subject LLC may elect to receive cash consideration in lieu of a portion of the Class A common stock otherwise issuable in the consolidation (at a price per share equal to the IPO price reduced by the underwriting discount per share paid by the company in the IPO), if the consolidation is approved and consummated by such subject LLC, provided that the aggregate cash consideration paid to participants in such subject LLC will not exceed [12-15%] of the aggregate consideration payable to all participants in such subject LLC (excluding the Wien group). The Wien group will not receive cash consideration in the consolidation at the time of the IPO and will therefore not be entitled to make any such cash election. Each subject LLC will enter into a contribution agreement conditioned on (i) the requisite consent of the participants in the subject LLC; (ii) the closing of the IPO and the listing of the Class A common stock on the NYSE or another national securities exchange; (iii) the closing of the consolidation no later than December 31, 2014; (iv) the participation by Empire State Building Associates L.L.C. and Empire State Building Company L.L.C., the private entity that is the operating lessee of the Empire State Building, in the consolidation; and (v) other customary conditions;

 

   

Based on the hypothetical exchange value of $10 per share which the supervisor has arbitrarily assigned for illustrative purposes, the company will issue to participants and holders of override interests in the private entities 113,493,608 operating partnership units having an exchange value of $1,134,936,080; 5,714,138 shares of Class A common stock having an exchange value of $57,141,376; and 821,624 shares of Class B common stock having an exchange value of $8,216,243 and the company will issue to equity holders in the management companies 809,703 operating partnership units having an exchange value of $8,097,032; 765,900 shares of Class A common stock having an exchange value of $7,659,000; and 16,524 shares of Class B common stock having an exchange value of $165,246, (not including, in each case, any additional shares of Class A common stock that may be issued to charitable organizations as described below). In addition, participants in the private entities who are non-accredited investors who would have been entitled to 6,977,290 shares of common stock on a fully diluted basis having an exchange value of $69,772,905, will receive cash at a price per share equal to the offering price in the IPO. Participants in the private entities who are charitable organizations, including the Helmsley estate, who would have been entitled in the aggregate to 104,600,982 shares of common stock on a fully diluted basis having an exchange value of $1,046,009,822 that have made a cash election will receive cash, subject to a cut back (at a price per share equal to the IPO price reduced by the underwriting discount per share paid by the company in the IPO) and will receive Class A common stock for the balance;

 

   

The Malkin Holdings group and the Helmsley estate will receive the largest amount of consideration in the consolidation, because they hold participation interests and, in the case of the Malkin Holdings group, overrides, issued to them or their predecessors during a period of more than 60 years in respect of their cumulative cash investments and their roles in the entity formation and property operations with respect to (a) all of the entities and properties in the case of the Malkin Holdings group including the activities of Lawrence A. Wien, Peter L. Malkin and Anthony E. Malkin for many decades and (b) a large number of them in the case of the Helmsley estate;

 

 

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As part of the consolidation, each private entity will contribute its property interest and other assets, other than interests in certain properties excluded from the consolidation, to the operating partnership or its subsidiary, in exchange for operating partnership units or, at the option of the participants in the private entities, shares of common stock and/or cash. The private entities (including the operating lessees) with the required consent of their participants, have agreed to transfer their interests in the properties, including their interests in the operating lessees, as part of the consolidation. Each private entity has entered into a contribution agreement conditioned on (i) the closing of the IPO and the listing of the Class A common stock on the NYSE or another national securities exchange; (ii) the closing of the consolidation no later than December 31, 2014; (iii) the participation of Empire State Building Associates L.L.C. and Empire State Building Company L.L.C., the private entity which owns an interest in the Empire State Building participating in the consolidation; (iv) the delivery of a fairness opinion by the independent valuer to the private entities and (v) other customary conditions;

 

   

The company will acquire pursuant to a contribution agreement with the supervisor and the Wien group the participation interests held by the Wien group in the subject LLCs and override interests of the supervisor in the subject LLCs in exchange for operating partnership units. The override interests under which the supervisor will share in the proceeds from the consolidation are contractual rights, previously and separately documented. In the case of each of Empire State Building Associates L.L.C. and 250 West 57th Street Associates L.L.C., the overrides were agreed to by participants on an individual, voluntary basis and provide the supervisor with 10% of the distribution of capital proceeds otherwise payable to participants that have agreed to the voluntary capital override program after they have received a return of their original investment. In the case of 60 East 42nd Street Associates L.L.C., the override is payable pursuant to its organizational documents and provides that supervisor is entitled to 10% of the distributions (without specifying the source of distributions) after the members have received distributions equal to a return at the rate of 14% on their cash investment in the year in which the distribution is made. Each of the overrides was valued based on the amount distributable to the supervisor under the terms of the override. The overrides were granted by the participants in either the subject LLCs’ organizational documents or in the subsequent, separate voluntary agreements entered into individually, to permit the supervisor to share in benefits resulting from improvements in the property’s operating results and value, and the supervisor did not pay any consideration for the overrides. The participation interests in each of the subject LLCs held by the Malkin Holdings group were acquired from Empire State Building Associates L.L.C., 60 East 42nd St. Associates L.L.C. and 250 West 57th St. Associates L.L.C., respectively, for the same consideration paid by other participants or were purchased from participants at a purchase price equal to or in excess of the original purchase price;

 

   

Each share of Class A common stock entitles the holder to one vote. Operating partnership units have economic rights similar to the Class A common stock but do not have the right to vote on matters presented to holders of Class A common stock and Class B common stock. Accredited investors in the private entities and the management companies which had an option to elect operating partnership units at the time they made their election of consideration in the private solicitation had an option to elect to receive one share of Class B common stock instead of one operating partnership unit for every 50 operating partnership units such participant would otherwise receive in the consolidation. The Class B common stock provides its holder with a voting right that is no greater than if such holder had received solely Class A common stock in the consolidation. Each outstanding share of Class B common stock entitles the holder to 50 votes on all matters on which the stockholders of Class A common stock are entitled to vote, including the election of directors, and holders of shares of Class A common stock and Class B common stock will vote together as a single class. Each share of Class B common stock has the same economic interest as a share of Class A common stock, and one share of Class B common stock and 49 operating partnership units together represent a similar economic value as 50 shares of Class A common stock. One share of Class B common stock may be converted into one share of

 

 

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Class A common stock at any time, and one share of Class B common stock is subject to automatic conversion into one share of Class A common stock upon a direct or indirect transfer of such share of Class B common stock or certain transfers of the operating partnership units held by the holder of Class B common stock (or a qualified transferee) to a person other than a qualified transferee;

 

   

The company will acquire through merger the supervisor and the other management companies, which are owned by the same persons as own the supervisor. Holders of interests in the management companies will receive shares of common stock or operating partnership units in exchange for the interests in such entities;

 

   

Charitable organizations, including the Helmsley estate, were granted a cash option because the payment of cash to such charitable organizations pursuant to the cash option is not expected to affect the company’s ability to meet the conditions for obtaining the reduced New York City and New York State transfer tax rate applicable to REITs. These charitable organizations had the option to receive cash at a price per share equal to the IPO price per share (reduced by the underwriting discount per share paid by the company in the IPO) to the extent of cash available from the IPO for this purpose after providing cash to redeem non-accredited investors in the private entities and participants in the subject LLCs (excluding the Wien group) who elect to receive cash and other uses of proceeds. To the extent that there is not sufficient available cash to pay in full the cash payable to electing charitable organizations, there will be a pro rata reduction in the cash received by each electing charitable organization and the balance will be in the form of Class A common stock;

 

   

Pursuant to the cash option referred to in the preceding paragraph, the Helmsley estate and other charitable organizations have exercised the cash option as to all of the operating partnership units issuable to them in the consolidation (which based on the exchange values represents 25.71% for the Helmsley estate and 0.60% for the other charitable organizations, respectively, of the common stock on a fully-diluted basis or $1.046 billion of the exchange value in the aggregate) and elected to receive Class A common stock if there is insufficient available cash. The Helmsley estate will also receive an amount equal to any New York City transfer tax savings resulting from its status as a charitable organization. In addition, the company and the Helmsley estate have also agreed that if the IPO is upsized after the effective time of the registration statement filed in connection with the IPO or if the underwriters in the IPO exercise their option to purchase additional shares of Class A common stock, all additional net proceeds from the sale of Class A common stock issued by the company in such upsize or option will be allocated solely to the Helmsley estate for purposes of the consolidation at the same value as the cash option described above;

 

   

The company has entered into a representation, warranty and indemnity agreement with Anthony E. Malkin and his siblings, Scott D. Malkin and Cynthia M. Blumenthal, pursuant to which they have made limited representations and warranties to the company and the operating partnership regarding the entities, properties and assets to be contributed to the company and agreed to indemnify the company and the operating partnership for 12 months following the closing of the consolidation for breaches of such representations subject to a $1 million deduction and threshold of up to a maximum of $25 million. Other than these individuals, none of the Malkin Family, or other participants in the subject LLCs, private entities or management companies, will provide the company with any indemnification;

 

   

The operating partnership intends to enter into a tax protection agreement with Anthony E. Malkin and Peter L. Malkin pursuant to which the company will agree to indemnify the Wien group and an additional third party investor in Metro Center (who was one of the original landowners and was involved in the development of the property) against certain tax liabilities if those tax liabilities result from (i) the operating partnership’s sale, transfer, conveyance or other taxable disposition of four specified properties (First Stamford Place, Metro Center, 10 Bank Street and 1542 Third Avenue,

 

 

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which collectively represent approximately 1.6% of the aggregate exchange value) to be acquired by the operating partnership in the consolidation, for a period of 12 years with respect to First Stamford Place and for the later of (x) eight years or (y) the death of both of Peter L. Malkin and Isabel W. Malkin, who are 78 and 75 years old, respectively, for the three other properties, (ii) the operating partnership’s failing to maintain until maturity the indebtedness secured by these properties or failing to use commercially reasonable efforts to refinance such indebtedness upon maturity in an amount equal to the principal balance of such indebtedness, or, if the operating partnership is unable to refinance such indebtedness at its current principal amount, at the highest principal amount possible, or (iii) the operating partnership’s failing to make available to any of these investors the opportunity to guarantee, or otherwise bear the risk of loss, for U.S. federal income tax purposes, of their allocable share of $160 million of indebtedness in the aggregate, until such investor owns less than the aggregate number of operating partnership units and shares of common stock equal to 50% of the aggregate number of such units and shares such investor received in the consolidation. The operating partnership estimates that if all of its assets subject to the tax protection agreement were sold in a taxable transaction immediately after the IPO, the amount of the operating partnership’s indemnification obligations (based on tax rates applicable for the taxable year ending December 31, 2012, and exchange values, and including additional payments to compensate the indemnified partners for additional tax liabilities resulting from the indemnification payments) would be approximately $84.7 million;

 

   

The company intends to enter into management agreements with the entities that own interests in the excluded properties and the excluded businesses;

 

   

The operating partnership has executed option agreements with three private entities supervised by the supervisor, one of which is the ground lessee of the property located at 112-120 West 34th Street and fee owner of the property located at 122 West 34th Street, one of which is the operating lessee of 112-122 West 34th Street and one of which is the ground lessee of 1400 Broadway, pursuant to which each of these private entities has granted to the operating partnership an option to acquire fee, long-term leasehold, sub-leasehold and/or sub-subleasehold interests in the option properties, as applicable. Concurrent with the closing of the consolidation, the company intends to enter into management agreements with respect to each of the option properties. Each of the Malkin Holdings group and the Helmsley estate owns interests in such private entities. Based on the exchange values the option properties would have had, calculated in accordance with the methodology used to derive the exchange values for the subject LLCs and the private entities, the Malkin Holdings group would receive consideration having an aggregate value of $69,512,182 in respect of its participation interests and overrides in the entities which own the option properties, and the Helmsley estate would receive consideration having an aggregate value of $143,808,863 in respect of its participation interests in such entities;

 

   

As a result of the consolidation, the company will assume approximately $1.05 billion of total debt (based on December 31, 2011 pro forma outstanding balances), and the company expects to have approximately $170.1 million of additional borrowing capacity under its loans on a pro forma basis;

 

   

The company will sell shares of Class A common stock in the IPO and will contribute the net proceeds from the IPO to the operating partnership in exchange for operating partnership units and

 

   

Effective upon consummation of the consolidation, the company expects to grant long-term incentive plan units and/or restricted shares of Class A common stock, subject to certain vesting requirements, to certain members of the senior management team, including officers of the supervisor.

The supervisor and its principals and certain of the private entities own interests in other properties, including the option properties, assets and businesses that will not be contributed to the company. The supervisor

 

 

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provides supervisory or advisory services with respect to certain of these properties. The company intends to enter into management agreements with the entities that own interests in these excluded properties and excluded businesses after consummation of the consolidation.

The company and the supervisor have required that the consolidation be completed no later than December 31, 2014.

 

 

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The following charts show the organization of each subject LLC prior to the consolidation:

Empire State Building Associates L.L.C.

 

LOGO

 

(1) Represents a voluntary capital override agreed to by approximately 94% of the participants and documented individually with each participant who granted the override, which provides the supervisor with 10% of the distribution of capital proceeds otherwise payable to participants that have agreed to the voluntary capital override program after they have received a return of their original investment. The supervisor will receive distributions on the voluntary capital overrides with respect to the consideration from the consolidation, because such consideration constitutes capital proceeds. Assuming that the enterprise value determined in connection with the IPO were the same as the aggregate exchange value, such overrides would comprise approximately 9.14% of the economic value of Empire State Building Associates L.L.C. These voluntary capital overrides were solicited pursuant to consent solicitation statements dated September 13, 1991, September 14, 2001 and June 9, 2008.
(2) This override, which is not a voluntary override, is payable pursuant to the original offering documents for Empire State Building Associates L.L.C. and provides the supervisor the right to receive additional payments equal to 6% of any distributions of overage rent received under the operating lease, 6% of 50% of the amount of the reduction in mortgage charges due to the repayment of the purchase money mortgage placed at the time of the original acquisition by Empire State Building Associates L.L.C. of its interest in the Empire State Building and 6% of 50% of certain scheduled reductions in ground rent payable by Empire State Building Associates L.L.C. under the operating lease.

 

 

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60 East 42nd St. Associates L.L.C.

 

LOGO

 

(1)

The override, which is not a voluntary override, represents a contractual obligation of the subject LLC payable pursuant to a consent of participants in 1968 and provides that supervisor is entitled to receive 10% of all additional amounts paid out (without specifying the source of distributions) after the members have received distributions equal to a return at the rate of 14% on their cash investment in the year in which the distribution is made. The supervisor will receive distributions on the override with respect to the consideration from the consolidation, because such consideration constitutes capital proceeds. Assuming that the enterprise value determined in connection with the IPO were the same as the aggregate exchange value, such override would comprise approximately 9.97% of the economic value of 60 East 42nd St. Associates L.L.C.

 

 

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250 West 57th St. Associates L.L.C.

 

LOGO

 

(1)

Represents a voluntary capital override agreed to by approximately 79.6% of the participants and documented individually with each participant who granted the override, which provides the supervisor with 10% of the distribution of capital proceeds otherwise payable to participants that have agreed to the voluntary capital override program after they have received a return of their original investment. The supervisor will receive distributions on the voluntary capital overrides with respect to the consideration from the consolidation, because such consideration constitutes capital proceeds. Assuming that the enterprise value determined in connection with the IPO were the same as the aggregate exchange value, such overrides would comprise approximately 7.44% of the economic value of 250 West 57th St. Associates L.L.C. These voluntary capital overrides were solicited pursuant to consent solicitation statements dated March 10, 2004 and May 17, 2006. All of these override interests are owned by the Malkin Holdings group.

(2) The override, which is not a voluntary override, is payable pursuant to a consent of participants in 1968, represents the right to receive 10% of all cash distributions (other than from mortgage, sale or condemnation proceeds) in excess of 15% on the remaining cash investment in any one year.

 

 

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The following chart shows the percentage ownership of the common stock on a fully diluted basis in the company (assuming exchange of all operating partnership units for Class A common stock, conversion of all Class B common stock into Class A common stock, and that no cash is paid to any participants) after closing of the consolidation but prior to the closing of the IPO, allocable to each of the entities shown in the table (including the Helmsley estate, which has made a cash election as described under “Related Party Transactions—Transactions Relating to the Consolidation”), and assuming the consolidation is approved by all three subject LLCs:

 

LOGO

 

(1) 15.61% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Malkin Holdings group and 0.08% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Helmsley estate.
(2) 6.68% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Malkin Holdings group and 63.75% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Helmsley estate.
(3) 17.19% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Malkin Holdings group and 0.39% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Helmsley estate.
(4) 16.75% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Malkin Holdings group and 27.0% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Helmsley estate.
(5) 14.15% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Malkin Holdings group and 0.28% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Helmsley estate.
(6) 33.41% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Malkin Holdings group and 31.50% of the shares of common stock on a fully diluted basis issuable to the entity is allocable to the Helmsley estate.
(7) 27.25% of the shares of common stock on a fully diluted basis issuable to the other private entities is allocable to the Malkin Holdings group and 20.50% of the shares of common stock on a fully diluted basis issuable to the other private entities is allocable to the Helmsley estate.
(8) All of the shares of common stock on a fully diluted basis issuable to the entity are allocated to the Malkin Holdings group.
(9) 16.10% of the shares of common stock on a fully diluted basis is allocable to the Malkin Holdings group and 25.71% of the shares of common stock on a fully diluted basis is allocable to the Helmsley estate.

 

 

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The following charts show, for each of the properties owned by the subject LLCs, the relative exchange value of the applicable property attributable to the subject LLC, the operating lessee, and, for each of the subject LLCs and operating lessees, the participants’ interests and override interests associated with the subject LLCs and operating lessees’ override interests, except as otherwise noted, are held by the Malkin Holdings group:

 

LOGO

 

(1) Voluntary capital transaction override.
(2) $54,167,577 of the overrides are paid to persons other than the Malkin Holdings group.

 

 

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LOGO

 

 

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LOGO

 

(1) Voluntary capital transaction override.
(2) $11,915,710 of the overrides are paid to persons other than the Malkin Holdings group.

 

 

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The following chart shows the organization of the company after the consolidation and prior to the IPO, assuming the consolidation is approved by all three subject LLCs and no cash is paid to any participants (including the Helmsley estate), other than to non-accredited investors in the private entities:

 

LOGO

The Class A common stock, Class B common stock and operating partnership units represent 50.80%, 0.29% and 48.91%, respectively, of the common stock, on a fully diluted basis.

 

 

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What You Will Receive if Your Subject LLC is Included in the Consolidation

If the consolidation is approved by the participants in your subject LLC and is consummated, you will receive shares of Class A common stock as consideration for your participation interest. You also will have the option to elect to exercise the cash option, as more fully described below.

Class A Common Stock. You will receive Class A common stock for your participation interest unless you receive cash on exercise of the cash option, as described below.

Based upon the Appraisal that the independent valuer prepared, the number of shares of Class A common stock you will receive was allocated as follows:

 

   

The exchange values were first determined for each subject LLC, each private entity and the management companies as follows:

 

   

The appraised values of the interests in the properties owned by the subject LLCs, the private entities and the management companies were determined by the independent valuer,

 

   

The appraised values were adjusted by the independent valuer as described more fully in “Reports, Opinions and Appraisals” to determine the exchange values and

 

   

The supervisor reviewed and approved the exchange values.

 

   

To allocate the shares of Class A common stock, the supervisor arbitrarily assigned a hypothetical $10 per share exchange value for illustrative purposes and arbitrarily assumed that the enterprise value of the company is equal to the aggregate exchange value of all of the contributed assets. The independent valuer allocated to each subject LLC a number of shares of Class A common stock equal to the exchange value of its assets divided by $10. See the section entitled “Summary—Allocation of Consideration in the Consolidation.”

In accordance with each subject LLC’s organizational documents, all of the shares of Class A common stock were allocated to the participants holding participation interests in the subject LLC, after taking into account the allocations in respect of the supervisor’s override interest.

The allocation of Class A common stock to the participants in this prospectus/consent solicitation is based on the hypothetical $10 per share exchange value arbitrarily assigned by the supervisor to illustrate the number of shares of common stock that a participant would receive if the enterprise value of the company determined in connection with the IPO were the same as the aggregate exchange value and the IPO price were $10 per share of Class A common stock. The actual number of shares of common stock, on a fully-diluted basis, issued in the consolidation will equal the enterprise value (which will be allocated to each of the subject LLCs, the private entities and the management companies in proportion to their relative share of the aggregate exchange value) divided by the IPO price. The enterprise value will be determined by the market conditions and the performance of the portfolio at the time of the IPO. The enterprise value may be higher or lower than the aggregate exchange value. The exchange value used herein is based on the Appraisal prepared by the independent valuer. Historically, in a typical initial public offering of a REIT, the enterprise value and initial public offering price are at a discount to the net asset value of the REIT’s portfolio of properties, which in turn may be above or below the aggregate exchange value.

Pursuant to lock-up agreements, each participant in the subject LLCs and private entities may not sell or otherwise transfer or encumber shares of common stock or operating partnership units (i) with respect to 50% of the shares of common stock and operating partnership units owned by them at completion of the IPO, for a period of 180 days after the IPO pricing date and (ii) with respect to any remaining shares of such common stock and operating partnership units, for a period of one year after the IPO pricing date, in each case without first obtaining the written consent of the representatives of the underwriters in the IPO, provided that if the IPO

 

 

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occurs on or before December 31, 2012, such participant (except the Helmsley estate) will have an earlier ability to sell up to between 19.5% (if the cash election limit is 12%) and 17% (if the cash election limit is 15%) of such Class A common stock received in the consolidation on or after April 1, 2013 to provide liquidity for income tax payments due on April 15, 2013 and an additional 30.5%-33% (resulting in an aggregate of 50%) of such Class A common stock received in the consolidation on or after such 180th day.

However, the Malkin Family and the company’s directors and senior management team members may not sell any of the shares of common stock or securities convertible or exchangeable into Class A common stock (including operating partnership units) held by any of them until one year after the IPO pricing date. In addition, the company has agreed with the representatives of the underwriters, subject to certain exceptions, not to sell or otherwise transfer or encumber any such shares or securities (including operating partnership units) at the completion of this offering for a period of 180 days after the IPO pricing date without the prior written consent of the representatives of such underwriters.

The company expects the second stage of the lock-up period will expire after one year, which applies only to the last 50% of the common stock and operating partnership units owned by all parties at completion of the IPO. However, prior to the IPO pricing date, the company may agree to extend the expiration date to not later than 18 months (instead of one year) after the IPO pricing date, if the representatives of the underwriters request such extension and the company determines based on market conditions at the time of the IPO that such one year lock-up would adversely affect the market price of the Class A common stock in the IPO.

Cash Option. Each participant in a subject LLC may elect to receive cash consideration in lieu of a portion of the Class A common stock otherwise issuable in the consolidation (at a price per share equal to the IPO price reduced by the underwriting discount per share paid by the company in the IPO), if the consolidation is approved and consummated by such subject LLC, provided that the aggregate cash consideration paid to participants in such subject LLC will not exceed [12-15%] of the aggregate consideration payable to all participants in such subject LLC (excluding the Wien group). The Wien group will not receive cash consideration in the consolidation at the time of the IPO and will therefore not be entitled to make any such cash election. Thus, if any participant does not make a cash election or makes a cash election for less than [12-15%] of the consideration payable to such participant in respect of such subject LLC, the excess will be allocated among the other electing participants in such subject LLC in proportion to their participation interests to the extent they elect to receive additional cash consideration.

Such [12-15%] limit on the cash elections in a subject LLC is designed to assist the company in meeting the conditions for obtaining a reduced rate of transfer tax in New York City and New York State for qualifying REITs. The supervisor believes such reduction may be partially available for property transfers to the operating partnership as part of the consolidation.

In addition, after the consolidation and the IPO, each participant (except the Malkin Family) will have the ability to sell up to half of the balance of such participant’s consideration (i.e., 50% of the Class A common stock received in the consolidation after the cash election) at any time after the 180th day following the IPO pricing date; provided that if the IPO occurs on or before December 31, 2012, each such participant in the subject LLCs (except the Helmsley estate) instead will have an earlier ability to sell up to between 19.5% (if the cash election limit is 12%) and 17% (if the cash election limit is 15%) of such Class A common stock received in the consolidation on or after April 1, 2013 to provide liquidity for income tax payments due on April 15, 2013 and an additional 30.5%-33% (resulting in an aggregate of 50%) of such Class A common stock received in the consolidation on or after such 180th day. The cash election, together with such ability to sell shares of Class A common stock, based upon a sale at or above the IPO price, is intended to provide a participant who is a U.S. individual with the ability to obtain an amount of cash sufficient to pay his or her U.S. federal, state, and local income taxes.

 

 

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The balance of the Class A common stock received in the consolidation may be sold at any time after one year following the IPO pricing date, except that such one year period may be extended by the company by not more than six months (resulting in a date not later than 18 months following the IPO pricing date) if the representatives of the underwriters in the IPO request such extension and the company determines based on market conditions at the time of the IPO that such one year lock-up period would adversely affect the market price of the Class A common stock in the IPO. Such extension would not modify the availability of the initial cash election or the timing described above for sale of the first half of such Class A common stock.

Accordingly, in addition to the cash option available to participants, as described above, the company has provided the Helmsley estate with a cash option that allows the Helmsley estate to elect to receive cash in lieu of Class A common stock, to the extent of available proceeds, which would represent a substantial amount of the net proceeds of the IPO after other specified expenses and uses of proceeds. Following the consummation of the consolidation and the IPO, the Helmsley estate is anticipated to continue to own a sizeable position in the company. Therefore, in light of the Helmsley estate’s desire, and requirement, to sell all or a significant portion of its post-IPO position, which could adversely affect the market price of the company’s Class A common stock following the IPO, the supervisor structured elements of the consolidation and the IPO, including this cash option, to minimize the Helmsley estate’s post-IPO position. The company also has provided that the net proceeds from any potential upsizing of the IPO or any exercise of the underwriters’ over-allotment option would also be applied to the Helmsley estate’s cash election to further reduce the Helmsley estate’s position in the company. Such reduction of the Helmsley estate’s overhang would be viewed favorably by the market and would provide for a better trading market in the company’s Class A common stock following the IPO for the benefit of all stockholders. The company has also provided registration rights to the Helmsley estate to provide for an efficient and transparent process for the Helmsley estate to sell all or a portion of its remaining interest in the company following the IPO. The company believes that the Helmsley estate’s cash election right does not affect the company’s ability to obtain a reduced New York City and New York State transfer rate due to the Helmsley estate’s status as a charitable organization and the structure of its ownership interests in the subject LLCs. The Helmsley estate may receive cash only to the extent of cash available from the IPO after payments in respect of the cash election by participants in the subject LLCs and only to the extent cash is not required for other purposes and therefore does not reduce cash required for the company or available for participants in the subject LLCs through their cash election.

The Malkin Holdings group will not receive any cash pursuant to the cash election or sell any of its shares of Class A common stock in the IPO. Additionally, the Malkin Holdings group is subject to a lock-up under which they cannot sell any shares of common stock or operating partnership units until one year after the IPO pricing date. The Malkin Holdings group has no present intention to sell shares of common stock or operating partnership units following the expiration of the lock-up period.

Why the Supervisor Believes the Consolidation is Fair to You

The supervisor believes that the terms of the consolidation are fair and that the consolidation will allow you to achieve liquidity and maximize the value of your investment in your subject LLC for the following principal reasons, as well as allowing the company to achieve costs savings, faster decision-making and greater and more efficient access to capital, all of which should increase the value of your investment:

 

   

The exchange values of each of the subject LLCs, the private entities and the management companies are based on the Appraisal by Duff & Phelps, LLC, the independent valuer. The independent valuer determined the exchange value, which was reviewed and approved by the supervisor. The supervisor believes that the allocations in accordance with the Appraisal by the independent valuer were in the best interests of the participants;

 

   

The supervisor believes that the expected benefits of the consolidation to you outweigh the risks and potential detriments of the consolidation to you. Some of those benefits are described above. The risks and potential detriments are discussed in “Risk Factors;”

 

 

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The supervisor considered alternatives to the consolidation including the continuation of the subject LLCs without change and the liquidation of the subject LLCs and the distributions of the net proceeds to you (as described below). The supervisor does not believe that the subject LLCs could realize their allocable share of the value of the properties through a sale of the interests in the properties held by them. The supervisor believes that, over time, the likely value of the Class A common stock will be higher than the value of the consideration you would receive from any of the other alternatives as a result of increased efficiencies, growth opportunities and other opportunities for value enhancement;

 

   

The supervisor considered that each participant in a subject LLC may elect to receive cash consideration in lieu of a portion of the Class A common stock otherwise issuable in the consolidation (at a price per share equal to the IPO price reduced by the underwriting discount per share paid by the company in the IPO), if the consolidation is approved and consummated by such subject LLC, provided that the aggregate cash consideration paid to participants in such subject LLC will not exceed [12-15%] of the aggregate consideration payable to all participants in such subject LLC (excluding the Wien group). In addition, after the consolidation and the IPO, each participant (except the Malkin Family) will have the ability to sell up to half of the balance of such participant’s consideration (i.e., 50% of the Class A common stock received in the consolidation after the cash election) at any time after the 180th day following the IPO pricing date; provided that if the IPO occurs on or before December 31, 2012, each such participant in the subject LLCs (except the Helmsley estate) instead will have an earlier ability to sell up to between 19.5% (if the cash election limit is 12%) and 17% (if the cash election limit is 15%) of such Class A common stock received in the consolidation on or after April 1, 2013 to provide liquidity for income tax payments due on April 15, 2013 and an additional 30.5%-33% (resulting in an aggregate of 50%) of such Class A common stock received in the consolidation on or after such 180th day. The cash election, together with such ability to sell shares of Class A common stock, based upon a sale at or above the IPO price, is intended to provide a participant who is a U.S. individual with the ability to obtain an amount of cash sufficient to pay his or her U.S. federal, state, and local income taxes;

 

   

The supervisor believes that the consolidation is fair to all participants in each subject LLC and as a whole, regardless of which particular combination of entities participates in the consolidation. Even if less than all of the subject LLCs participate in the consolidation, the supervisor believes that the participants in the subject LLCs that do participate will realize the benefits described under “—Benefits of Participation in the Consolidation.” There are no material differences among the subject LLCs (such as with respect to types of assets owned or investment objectives) that affect the reasons why the supervisor believes that the consolidation is fair to you. While the supervisor believes that it would be more beneficial to participants if all of the subject LLCs participate in the consolidation, the supervisor believes that, through a combination of the properties of the private entities, for which necessary approvals have been obtained, and the property interests of Empire State Building Associates L.L.C. and Empire State Building Company L.L.C., the company will be of sufficient size and have sufficient assets to allow participants to realize the benefits described under “Summary—Benefits of Participation in the Consolidation” even if one or both of 60 East 42nd St. Associates L.L.C. and 250 West 57th St. Associates L.L.C. do not participate in the consolidation;

 

   

While the subject LLCs’ exchange values have been determined based on the Appraisal by the independent valuer, which has also delivered a fairness opinion as described above, no independent representative was retained to negotiate on behalf of the participants. There are 23 subject LLCs and private entities and groups with different interests in many of these entities. The supervisor does not believe that a single independent representative could have represented the interests of all participants and believes that to locate and retain an independent and equally competent and qualified representative for each separate interest in the consolidation is not possible. The supervisor represents the interests of all participants in the subject LLCs and private entities. The supervisor has served the same role in the past for sales of other properties with different groups of participants and believes it is

 

 

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not required to retain any independent representative on behalf of each group of participants or all of the participants as a whole. The supervisor believes the Appraisal prepared by the independent valuer serves the purposes of representing all parties fairly and that the consolidation is fair to all participants regardless of the absence of any such independent representative;

 

   

While the supervisor has conflicts of interest which are described under “Conflicts of Interest,” the supervisor does not believe that these conflicts of interests affected its fairness determination;

 

   

In considering fairness, the supervisor also took into account the proposed terms of the compensation payable to persons in the Malkin Holdings group by the company after the closing of the consolidation, which, the supervisor believes, are on terms customary for similar publicly-traded REITs and are based on recommendations of a compensation consultant and

 

   

The supervisor has adopted and concurs with the conclusions of the fairness opinion from and the Appraisal by the independent valuer, which are described below.

Appraisal

The independent valuer has delivered to the supervisor a copy of its report, based upon the review, analysis, scope, assumptions, qualifications and limitations described therein, as to the estimated fair market value of the properties owned by the subject LLCs and the private entities as of             , 2012 (the “Appraisal”). The Appraisal, which contains a description of the assumptions and qualifications made, matters considered and limitations on the review and analysis, is attached to this prospectus/consent solicitation as Appendix B and should be read in its entirety.

The independent valuer has appraised the properties utilizing solely the income approach to valuation. The income approach is based on the assumption that the value of a property or portfolio of properties can be represented by the present value of future cash flows. These cash flows are compiled into a value through either direct capitalization or discounted cash flow analysis, or a combination of the two. The indicated value by the income approach represents the estimated amount an investor would pay for the expected future stream of net cash flow generated by a property or a portfolio of properties (calculated as gross income less operating expenses, capital expenditures, and leasing costs) generated by a property or a portfolio of properties. As used herein, market value is defined by the Appraisal of Real Estate, Thirteenth Edition, as follows: “The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeably and for self-interest, and assuming that neither is under undue duress.”

The income approach was relied upon in determining the market value of the properties owned by the subject LLCs and private entities (with the exception of the Stamford, CT land which utilized the sales comparison approach). The independent valuer believes that the income approach is the approach utilized by typical investors and other market participants in the local market of the properties owned by the subject LLCs and private entities, and was therefore determined to be the most reliable indicator of market value.

In performing the Appraisal, the independent valuer conducted investigations and inquiries as it deemed appropriate in establishing its estimates of value and made assumptions and identified qualifications and limitations that it considered necessary in its findings. The independent valuer’s opinion of the estimated value of the properties owned by each of the entities is as of July 1, 2011. They do not necessarily reflect the sales prices of the properties or portfolio that would be realized in actual sales of the properties or portfolio. These prices could be higher or lower than the appraised value of the properties or portfolio.

For further information, please see “Reports, Opinions and Appraisals—Appraisal.”

 

 

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Fairness Opinion

The independent valuer has delivered to the supervisor and each of the subject LLCs and the private entities its opinion, dated             , 2012, to the effect that, as of that date and subject to the assumptions, limitations and qualifications contained therein, the allocation of consideration (Class A common stock, Class B common stock, operating partnership units or cash consideration) (i) among each subject LLC, each private entity and the management companies was fair from a financial point of view to each such subject LLC, each such private entity and the participants in each such subject LLC and each such private entity, and (ii) to the participants in each subject LLC and each private entity was fair from a financial point of view to the participants in each such subject LLC and each such private entity (without giving effect to any impact of the consolidation on any particular participant other than in its capacity as a participant in each of the subject LLCs and each of the private entities). In this regard, the fairness opinion addressed the fairness of the consolidation assuming that each subject LLC and each private entity would participate in the proposed consolidation and did not address the fairness of all possible combinations in the proposed consolidation. The supervisor believes that, for reasons stated under “Recommendation and Fairness Determination – Material Factors Underlying Belief as to Fairness,” such opinion addressing the fairness of all possible combinations in the proposed consolidation is not necessary because the supervisor believes that the consolidation is fair, regardless of which particular combination of entities participates in the consolidation among any such combination.

The fairness opinion, dated             , 2012, is attached as Appendix A to this prospectus/consent solicitation. You should read the independent valuer’s opinion in its entirety with respect to the assumptions made, matters considered and limits of the review undertaken by the independent valuer in rendering its opinion.

For further information, please see “Reports, Opinions and Appraisals—Fairness Opinion.”

Alternatives to the Consolidation

In determining whether to propose and recommend the consolidation, the supervisor considered several alternatives. The following discussion summarizes the alternatives to the consolidation that each subject LLC could have pursued. Each of the alternatives that the supervisor considered, including the alternatives discussed below, is described in more detail under the section entitled “The Consolidation—Alternatives to the Consolidation.”

The principal alternatives considered by the supervisor were:

 

   

Liquidation through the sale by each subject LLC of its interest in its property, either individually or as part of a third-party portfolio transaction, followed by a distribution of the net proceeds to its participants or

 

   

Continued management of each subject LLC as currently structured.

The supervisor also considered other alternatives:

 

   

The possibility of converting each subject LLC into a separate REIT that would list its shares on a national securities exchange. The supervisor believes that a REIT with a relatively small capitalization that is advised by an outside advisor and owns an interest in the ground lessor of a single property with most of its cash flow dependent on overage rent under the operating lease would not be well-received by traditional open-market purchasers of REIT common stock.

 

   

Listing of the participation interests of each subject LLC in its current form as a limited liability company on a national securities exchange. The supervisor believes there would be limited trading interest in the presently outstanding participation interests due to, among other things, (i) the fact that the subject LLCs have a relatively small capitalization, own an interest in a property which is operated

 

 

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by an operating lessee that has significant decision-making authority with respect to the property; and (ii) the two-tier subject LLC structure, including the relative lack of certain corporate governance attributes, such as the ability to elect directors.

 

   

Other means of producing liquidity for the participants, such as cash tender offers to acquire participation interests from participants or borrowing by the subject LLCs secured by their interests in properties to provide funds for distribution to participants. The supervisor believes that cash tender offers are costly and would not yield a good value for investors and that borrowing to fund added distributions is not a feasible alternative given that most of its cash flow is dependent on overage rent under the operating lease.

Advantages and Disadvantages of Liquidation Alternative. The supervisor believes that there would be advantages of a liquidation of your subject LLC, including:

 

   

Liquidation provides you with liquidity from a sale of an interest in the property owned by your subject LLC. You would receive your share of the net proceeds obtained from a sale of the interest in the property of your subject LLC;

 

   

The amount that you would receive would not depend on the stock market’s valuation of the company, but rather your share of the consideration received from a sale of the interests in the property of your subject LLC and

 

   

You would avoid the risks of continued ownership of your subject LLC or ownership of the company.

The supervisor believes that there would be disadvantages to a liquidation of your subject LLC, including:

 

   

The interest in the property owned by the subject LLC on its own may not create demand from investors, may not be as attractive for financing for investors to acquire the property and has a higher risk profile than the interest in the property as part of a portfolio;

 

   

You would not participate in potential increases in value resulting from anticipated operating efficiencies, marketing efficiencies, capital market efficiencies and an improved governance structure;

 

   

You would not participate in potential increases in value resulting from (a) enhanced performance of the existing portfolio due to leasing available and expiring space at higher rents following the recent renovations and repositioning of the initial properties operated as a branded portfolio and (b) potential additional investments and

 

   

The supervisor does not believe that the subject LLCs could realize their allocable share of the value of the properties through a sale of the interests in the properties held by them. The operating lessees have agreed to transfer their interests in the properties as part of the consolidation, regardless of whether a subject LLC approves the consolidation, and, if the consolidation closes, it may not be possible for a subject LLC to realize its allocable share of the value of the entire property through a sale.

While the supervisor believes the consolidation will provide greater benefits to participants than a liquidation, the supervisor believes it is in the best interest of the participants to approve the third-party portfolio proposal, which will allow the supervisor to consider a third-party offer, if one is made, as an alternative to the consolidation.

Advantages and Disadvantages of Continuation Alternative. The supervisor believes there would be advantages to the continued operation of the subject LLCs, including:

 

   

The participants would continue to receive regular monthly distributions from Empire State Building Associates L.L.C., 60 East 42nd St. Associates L.L.C. and 250 West 57th St. Associates L.L.C.;

 

 

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The subject LLCs eventually may sell their interests in the properties and distribute the net proceeds, although the supervisor does not believe that such a sale would optimize the value of the participants’ participation interests;

 

   

Continuing the subject LLC without change avoids the risks related to the consolidation as described in this prospectus/consent solicitation and

 

   

Each subject LLC would retain the individual benefits of ownership of its interest in its property.

The supervisor believes that there would be disadvantages to the continued operation of the subject LLCs, including:

 

   

The interest in the property owned by the subject LLC on its own may not create demand from investors, may not be attractive for financing for investors to acquire the property and has a higher risk profile than the interest in the property as a portfolio.

 

   

Your investment would continue to be illiquid because your participation interest is not freely transferable and there is no established public trading market or market valuation for your participation interest;

 

   

The subject LLCs have limited roles in property operations;

 

   

The operation of the subject LLC is inefficient and costly in general and participants do not share in the same economic benefit that they would receive through ownership and operation of a property by a single entity with a modern governance structure;

 

   

The subject LLCs have a cumbersome and costly approval process for certain actions, including financings and

 

   

Your subject LLC owns an interest in a single property and is not diversified.

Comparison of Distributions

The following table sets forth the budgeted annual distributions of the subject LLCs for the year ended December 31, 2012, and the description below the table shows the company’s estimate of annual dividend yields for REITs investing in similar types of properties in similar geographic areas to the company:

 

Subject LLC

   Budgeted Annual Distribution of Subject LLC
for the year ending December 31, 2012
Per $1,000 Original Investment(1)
 

Empire State Building Associates L.L.C.

   $ 644 (2) 

60 East 42nd St. Associates L.L.C.

   $ 150 (3) 

250 West 57th St. Associates L.L.C.

   $ 200 (4) 

 

(1) The budgeted annual distributions are based on budgeted cash flow of the subject LLCs for the purpose of calculating ranges of going-concern values. They are presented for comparative purposes only. In the past the amount of cash flow of the subject LLCs available for distribution has been reduced by capital expenditures and other expenses of the subject LLCs. The actual amount of distributions will be based on numerous factors. Accordingly, participants should not treat this budgeted annual distribution as the amount that they would have received if the subject LLC continued its operations.
(2) The budgeted annual distribution represents distributions out of base rent. Additional distributions of $0, $102 and $0, per $1,000 original investment, were made out of additional rent for the years ended December 31, 2009, December 31, 2010 and December 31, 2011, respectively.
(3) The budgeted annual distribution represents distributions out of base rent. Additional distributions of $306, $0 and $0, per $1,000 original investment, were made out of additional rent for the years ended December 31, 2009, December 31, 2010 and December 31, 2011, respectively.
(4) The budgeted annual distribution represents distributions out of base rent. Additional distributions of $1,162, $1,082 and $712, per $1,000 original investment, were distributed out of additional rent, for the years ended December 31, 2009, December 31, 2010 and December 31, 2011, respectively.

 

 

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Over the last 10 years, public REITs investing in similar types of properties in similar geographic areas to the company have paid an average dividend yield per annum in the range of 2.0% to 4.0% of their market price. These yields change as the market price of these public peer companies increases or decreases. The company anticipates that it will pay a quarterly dividend on its IPO price within or approximate to the range of dividend yields associated with these public peer companies existing at the time of the company’s IPO. However, the company’s actual dividend yield could be higher or lower than this range of dividend yields, and the company cannot estimate at this time the amount of dividends that it will be able to pay after closing of the consolidation and the IPO. The actual dividend yield on the company’s Class A common stock will depend on the market conditions at the time of the IPO and the company’s cash available for distribution at the time of the IPO. Further, any distributions declared by the company will be authorized by its board of directors in their sole discretion out of funds legally available therefor and will be dependent upon a number of factors, including restrictions under applicable law, the capital requirements of the company and the distribution requirements necessary to maintain the company’s qualification as a REIT. These factors include the distributable income generated by operations, the principal and interest payments on debt, capital expenditure levels, the company’s policy with respect to cash distributions and the capitalization and asset composition of the company, which will vary based on the private entities and the subject LLCs that ultimately participate in the consolidation.

Voluntary Pro Rata Reimbursement Program for Expenses of Legal Proceedings with Former Property Manager and Leasing Agent

In 1997, the supervisor commenced litigation and arbitration proceedings, which is referred to herein as the former property manager and leasing agent legal proceedings, to remove Helmsley-Spear, Inc. (after it was sold by entities controlled by Leona M. Helmsley), the former property manager and leasing agent, as property manager and leasing agent of the properties owned by the subject LLCs.

The successful outcome of the former property manager and leasing agent legal proceedings and the settlement thereof enabled the subject LLCs to conclude the termination of the former property manager and leasing agent as property manager and leasing agent (with the release of claims) and engage new independent property managers (except Empire State Building Associates L.L.C., which later became self-managed) and leasing agents and to launch strategic improvements and Malkin branding programs for the properties that the subject LLCs own. The supervisor also added engineering, marketing and tax/accounting staff to compensate for the former property manager and leasing agent’s deficiency. While the supervisor has believed from inception that it is entitled to be reimbursed for these litigation and arbitration expenses, it, together with Peter L. Malkin, advanced all costs pending the outcome.

Now, with the impending consolidation, the supervisor requests of each participant in each subject LLC, on a voluntary and individual basis, consent that a portion of your distributions to be received in connection with the consolidation or a third-party portfolio transaction, as applicable, be applied to reimburse the supervisor and Peter L. Malkin for a pro rata share of such advances, including interest at prime, from the date of each such advance. The same voluntary pro rata reimbursement program has been approved by holders representing 72.36% of the interests in the 13 private entities and other entities supervised by the supervisor to which the proposal has been made. These approvals include the Helmsley estate, which as part of an agreement with the supervisor covering this and other matters, has paid the voluntary pro rata reimbursement to the supervisor for its pro rata share of costs advanced, plus interest, which totaled $5,021,048.

If you consent to the voluntary pro rata reimbursement program, the supervisor and Peter L. Malkin will be reimbursed for your pro rata share of costs, plus interest, previously incurred out of your share of the excess cash of your subject LLC that is being distributed to participants, and, to the extent that is insufficient, the consideration that you would receive in the consolidation or the consideration that you would receive in a third-party portfolio transaction, as applicable, will be reduced by the balance and such balance would be paid to the supervisor and Peter L. Malkin in shares of Class A common stock, if the consolidation is consummated, or

 

 

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out of distributions that you would receive from the proceeds of a third-party portfolio transaction, if consummated, or out of distributions from operations of the subject LLC. To the extent that the supervisor and Peter L. Malkin have not otherwise been reimbursed from distributions in connection with the consolidation, 50% of any distributions to be paid to you in excess of your share of aggregate monthly distributions by the subject LLC equal to $3,889,333 per annum, $1,046,320 per annum and $720,000 per annum, respectively, for Empire State Building Associates L.L.C., 60 East 42nd St. Associates L.L.C. and 250 West 57th St. Associates L.L.C. for the period commencing January 1, 2008 (including any cumulative deficiency from prior months) will be applied to reimburse the supervisor and Peter L. Malkin for a pro rata share of such advances, including interest at prime from the date of each such advance, until your pro rata share of the costs is paid in full. Cumulative distributions equal to the target amount have been made for the period from January 1, 2008 through the date hereof and therefore there are no past cumulative deficiencies.

The table below shows the amount to be received by the supervisor out of the distributions of each consenting participant for each $1,000 of original investment by a participant pursuant to the voluntary pro rata reimbursement program:

 

     Exchange Value of Shares
of Common Stock to be
Received by Participants
per
$1,000 Original Investment
       
     Voluntary Reimbursement  
     Per $1,000
Original
Investment(2)
     Total  

Empire State Building Associates L.L.C.

   $ 33,085 (1)    $ 101       $ 3,341,533   

60 East 42nd St. Associates L.L.C.

   $ 38,972      $ 237       $ 1,659,613   

250 West 57th St. Associates L.L.C.

   $ 35,722 (1)    $ 205       $ 736,506   

 

(1)

Represents exchange value for participants subject to the voluntary override program. Participants in Empire State Building Associates L.L.C. not subject to the voluntary override program will receive an exchange value of shares of Class A common stock per $1,000 original investment of $36,650, and participants in 250 West 57th St. Associates L.L.C. not subject to the voluntary override program will receive an exchange value of shares of Class A common stock per $1,000 original investment of $39,468.

(2) Empire State Building Associates L.L.C.’s, 60 East 42nd St. Associates L.L.C.’s and 250 West 57th St. Associates L.L.C.’s share of the aggregate voluntary reimbursement (before any reimbursements) is $3,150,896, $1,564,930, and $694,487, respectively, plus interest. The amount shown in the table includes accrued interest through December 31, 2011 and does not include interest which will accrue subsequent to December 31, 2011.

The consent to the voluntary pro rata reimbursement program is independent of your vote on the consolidation. Thus, you can consent to the program whether you voted “FOR,” “AGAINST,” “ABSTAIN” or failed to vote on the consolidation and the third-party portfolio proposal. Your failure to consent to the program will not affect whether or not the subject LLC participates in the consolidation or a third-party portfolio transaction.

See “Voluntary Pro Rata Reimbursement Program for Expenses of Legal Proceedings with Former Property Manager and Leasing Agent.”

 

 

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Allocation of Consideration in the Consolidation

The following table sets forth for each subject LLC, each private entity and the management companies:

 

   

the exchange value of each subject LLC, each private entity and the management companies;

 

   

the percentage of total exchange value and percentage of total shares of common stock, on a fully-diluted basis, to be issued;

 

   

the number of shares of common stock, on a fully-diluted basis, to be allocated to each subject LLC, each private entity and the management companies based on the hypothetical exchange value of $10 per share arbitrarily assigned by the supervisor for illustrative purposes, including the number of operating partnership units to be allocated on account of the override interests of the supervisor and the Malkin Holdings group;

 

   

the value of common stock or operating partnership units based on the hypothetical exchange value of $10 per share arbitrarily assigned by the supervisor for illustrative purposes for each $1,000 of original investment in each subject LLC and its operating lessee;

 

   

the book value (deficit) of the assets determined in accordance with U.S. generally accepted accounting principles, which is referred to herein as GAAP, per $1,000 of original investment in each subject LLC and its operating lessee; and

 

   

the number of shares of common stock, on a fully-diluted basis, per $1,000 original investment in each subject LLC and its operating lessee:

 

                      Per $1,000 Original Investment (except as
otherwise noted)
 

Entity(1)

  Total
Exchange
Value(2)(3)
    Percentage of
Total Exchange
Value and
Percentage of
Total Shares of
Common Stock
Issued, on a
Fully-Diluted
Basis(4)
    Number of
Shares of
Common Stock,
on a
Fully-Diluted
Basis(4)(5)
    Value of Shares
of Common
Stock or
Operating
Partnership
Units(3)
    GAAP Book
Value
(Deficit) as of
December 31,
2011
    Number of
Shares of
Common
Stock,

on a
Fully-Diluted
Basis(5)
 

Empire State Building Associates L.L.C.

           

Participants (subject to voluntary override)

  $ 1,026,181,242        25.7     102,618,124      $ 33,085      $ 644        3,308   

Participants (not subject to voluntary override)

  $ 72,687,481        1.8     7,268,748      $ 36,650      $ 644        3,665   

Override Interests to the Malkin Holdings group

  $ 110,573,562        2.8     11,057,356        NA        NA        NA   

Other Override Interests

  $ 0        0     0        NA        NA        NA   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,209,442,285        30.4     120,944,229         

60 East 42nd St. Associates L.L.C.

           

Participants

  $ 272,804,500        6.8     27,280,450      $ 38,972      $ (1,834     3,897   

Override Interests to the Malkin Holdings group

  $ 30,202,722        0.8     3,020,272        NA        NA        NA   

Other Override Interests

  $ 0        0     0        NA        NA        NA   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 303,007,222        7.6     30,300,722         

250 West 57th St. Associates L.L.C.

           

Participants (subject to voluntary override)

  $ 100,722,912        2.5     10,072,291      $ 35,722      $ (1,290     3,572   

Participants (not subject to voluntary override)

  $ 30,798,514        0.8     3,079,851      $ 39,468      $ (1,290     3,947   

Override Interests to the Malkin Holdings group

  $ 10,564,842        0.3     1,056,484        NA        NA        NA   

Other Override Interests

  $ 0        0     0        NA        NA        NA   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 142,086,268        3.6     14,208,627         

 

 

63


Table of Contents
                      Per $1,000 Original Investment (except as
otherwise noted)
 

Entity(1)

  Total
Exchange
Value(2)(3)
    Percentage of
Total Exchange
Value and
Percentage of
Total Shares of
Common Stock
Issued, on a
Fully-Diluted
Basis(4)
    Number of
Shares of
Common Stock,
on a
Fully-Diluted
Basis(4)(5)
    Value of Shares
of Common
Stock or
Operating
Partnership
Units(3)
    GAAP Book
Value
(Deficit) as of
December 31,
2011
    Number of
Shares of
Common
Stock,

on a
Fully-Diluted
Basis(5)
 

Empire State Building Company L.L.C.(6)(7)

           

Members and Participants

  $  1,081,109,453        27.1     108,110,945      $  10,811,095      $  2,503,578        1,081,109   

Override Interests to the Malkin Holdings group

  $ 54,167,577        1.4     5,416,758        NA        NA        NA   

Other Override Interests

  $ 54,498,551        1.4     5,449,855        NA        NA        NA   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,189,775,581        29.9     118,977,558         

Lincoln Building Associates L.L.C.(8)

           

Members

  $ 258,229,175        6.5     25,822,918      $ 258,229      $ 54,830        25,823   

Override Interests to the Malkin Holdings group

  $ 28,692,131        0.7     2,869,213        NA        NA        NA   

Other Override Interests

  $ 0        0     0        NA        NA        NA   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 286,921,306        7.2     28,692,131         

Fisk Building Associates L.L.C.(9)

           

Members and Participants

  $ 91,818,702        2.3     9,181,870      $ 918,187      $ 252,452        91,818   

Override Interests to the Malkin Holdings group

  $ 27,553,025        0.7     2,755,303        NA        NA        NA   

Other Override Interests

  $ 11,915,710        0.3     1,191,571        NA        NA        NA   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 131,287,437        3.3     13,128,744         

1333 Broadway Associates L.L.C.

           

Members

  $ 136,432,404        3.4     13,643,240         

1350 Broadway Associates L.L.C.

           

Peter L. Malkin—50% Group

  $ 58,061,442        1.5     5,806,144         

Override Interests to the Malkin Holdings group

  $ 14,467,098        0.4     1,446,710         

Other Override Interests

  $ 0        0     0         

David M. Baldwin—50% Group

  $ 72,528,541        1.8     7,252,854         
 

 

 

   

 

 

   

 

 

       

Total

  $ 145,057,081        3.7     14,505,708         

Marlboro Building Associates L.L.C.

           

Members

  $ 133,498,858        3.4     13,349,886         

Override Interests to the Malkin Holdings group

  $ 9,371,307        0.2     937,131         

Other Override Interests

  $ 0        0     0         
 

 

 

   

 

 

   

 

 

       

Total

  $ 142,870,165        3.6     14,287,017         

Seventh & 37th Building Associates L.L.C.

           

Participants

  $ 51,247,399        1.3     5,124,740         

Override Interests to the Malkin Holdings group

  $ 4,815,673        0.1     481,567         

Other Override Interests

  $ 0        0     0         
 

 

 

   

 

 

   

 

 

       

Total

  $ 56,063,072        1.4     5,606,307         

501 Seventh Avenue Associates L.L.C.

           

Member

  $ 47,362,949        1.2     4,736,295         

Override Interests to the Malkin Holdings group

  $ 5,262,550        0.1     526,255         

Other Override Interests

  $ 0        0     0         
 

 

 

   

 

 

   

 

 

       

Total

  $ 52,625,499        1.3     5,262,550         

 

 

64


Table of Contents
                      Per $1,000 Original Investment (except as
otherwise noted)

Entity(1)

  Total
Exchange
Value(2)(3)
    Percentage of
Total Exchange
Value and
Percentage of
Total Shares of
Common Stock
Issued, on a
Fully-Diluted
Basis(4)
    Number of
Shares of
Common Stock,
on a
Fully-Diluted
Basis(4)(5)
    Value of Shares
of Common
Stock or
Operating
Partnership
Units(3)
  GAAP Book
Value
(Deficit) as of
December 31,
2011
  Number of
Shares of
Common
Stock,

on a
Fully-Diluted
Basis(5)

Soundview Plaza Associates II L.L.C.(10)

           

Malkin Co-Investor Capital L.P.(General Partner)(11)

  $ 81,335        0.0     8,134         

Malkin Co-Investor Capital L.P.(Class A LPs)

  $ 8,052,199        0.2     805,220         

Malkin Co-Investor Capital L.P.(Class B LPs) (12)

  $ 0        0.0     0         

Peter L. Malkin

  $ 3,713,727        0.1     371,373         

New Soundview Plaza Associates, Limited Partnership

  $ 3,528,039        0.1     352,804         
 

 

 

   

 

 

   

 

 

       

Total

  $ 15,375,300        0.4     1,537,530         

East West Manhattan Retail Portfolio L.P.

           

General Partner(11)

  $ 265,826        0.0     26,583         

Class A LPs

  $ 13,158,378        0.3     1,315,838         

Class B LP(12)

  $ 13,158,378        0.3     1,315,838         
 

 

 

   

 

 

   

 

 

       

Total

  $ 26,582,582        0.6     2,658,258         

One Station Place, Limited Partnership(10)

           

General Partner(11)

  $ 369,701        0.0     36,970         

Class A LP

  $ 3,327,305        0.1     332,731         

Class B LPs

  $ 33,273,054        0.8     3,327,305         
 

 

 

   

 

 

   

 

 

       

Total

  $ 36,970,060        0.9     3,697,006         

New York Union Square Retail L.P.

           

General Partner(11)

  $ 270,980        0.0     27,098         

Class A LPs

  $ 13,413,525        0.3     1,341,353         

Class B LP(12)

  $ 13,413,525        0.3     1,341,353         
 

 

 

   

 

 

   

 

 

       

Total

  $ 27,098,030        0.6     2,709,803         

Westport Main Street Retail L.L.C.(10)

           

Manager(13)

  $ 49,255        0.0     4,926         

Class A Members

  $ 4,876,286        0.1   &nb