Tuesday, April 30, 2013


There are too many pieces to the puzzle of the Empire State Building, which make answers to a complex, obfuscated proposal difficult to find.



What we need is a straight forward, honest approach before our puzzle of ESB ownership decisions can be completed.

The following scenario, simplified, seems to make some sense:

1. Under the 1961 contract, signers were given a solid deal for a solid investment which had a long lifespan.

2. Between now and then, these same investors or their heirs were consulted about various changes to ownership, building improvements, etc. and gave their consent to forego revenue to add to the value of their investment.

3. Income sacrifices have played a large roll in glorifying the Empire State Building. Appraised values reflect not only this iconic piece of property and its location, but the improvements paid for by the investors.

4. In considering the deal before us, payback to the investors for their loss of income over the years in addition to the market value of the building and payback of any expenses allocated from revenues used for the expenses incurred in putting together the REIT need to be itemized and presented to the owners. If this arithmetic is in the documents, it seems to be hiding somewhere.

5. Unlike other changes undertaken by management, 

this deal was never presented to the owners before it was launched.

6. This puzzle is a confusing one. It would be interesting to see if "there is a train about to come down the track" which is not yet clearly in focus, perhaps lost in our sea of paperwork. And / or "hidden agendas" hinted at and unfortunately often put to use in the business dealings of our times.

7. It is hard to say "yes" when the puzzle is incomplete.




Thursday, April 4, 2013

Empire State thoughts … it is really a simple matter

(Note: This post was written earlier and intentionally not published at that time. I think it is still pertinent and hope that future actions on the part of the supervisors, allow owners to weigh in before starting down the path to considering changes. There are a number of knowledgeable owners who could provide thoughtful insights.)

What is becoming clearer, IMHO, is that the issue of Empire State is not so complicated, but is made to seem so by Malkin Holdings and the legal, financial, and public relations agencies they have hired (with our money) to help them, as they obfuscate the basic issues of ownership and management responsibilities working towards management's apparent goal of …

confusing the issues by not providing straight answers to our questions, as their special agenda attempts to replace the basic, clearly focused work of Larry Wein's 1960s agreement … with un-ending, unintelligible mail, printed materials, DVD, and phone calls full of stock market, law and financial language even the experts struggle to understand.

Nonsense. Empire State Building Associates is on the deed, owns the building, the land and the master lease. That's it, that's good enough. Do we want this ownership to include all of the other buildings, with their differing management needs, in the same geographic location, while being placed under the vicissitudes of the stock market, replacing this quite simple investment in a building that holds such a special place amongst architectural wonders? We should be so honored that our families trusted, and many struggled, to enter into this agreement with Mr. Wein.

It might be easier for Malkin Holdings to put their other properties under one umbrella REIT, as they appear to have the consent from those building owners.

This building shouldn't be lumped into that deal.

Reuters reported on the MacKenzie Capital Management, LLC offer to investors to buy 170 units at $110,000 each (http://www.reuters.com/article/2013/02/20/us-empirestatebuilding-tenderoffer-idUSBRE91J03I20130220).  That offer appears to have been made before the SEC issued the final S-4 and makes us wonder how they got our mailing addresses to give us that low-ball offer while potentially gaining 170 (presumably "yes") votes.

Why didn't management include ESBA from the beginning so we could think this through and weigh-in with perceived risks and benefits of any new financial structure? It wouldn't be an easy task, but this "end run" presents its own difficulties.

This investment structure may be "out of style", but it sure anticipated the future ... and where is the evidence that it is no longer workable?

If there is really fair value to this deal for us, it surely would be helpful to have it presented in plain English, so it gets fair appraisal. Better yet, bring us together and let's chat (sans conference calls). That is how agreements have been forged in the "social - emotional" intelligence of our predecessors throughout time.

Those are my thoughts, resulting from a recent conversation.

PS: Really, the Forbes magazine's recent article in our mail? ... one-sided I'd say, hardly fair reporting as they apparently did not interview us other investors (the majority investors after all) ... (http://www.reuters.com/article/2013/02/20/us-empirestatebuilding-tenderoffer-idUSBRE91J03I20130220)

How it all got started ... Larry Wien's vision



Shared with me and passed along to you....

The tallest building in the world was sold last week for the highest price ever paid for a single
structure. For $65 million, Chicago Financier Henry Crown sold the 102-story Empire State
Building, a flop when it was built in the Depression but a moneymaker now, to a syndicate headed
by a personable Manhattan lawyer and real estate wheeler-dealer, Lawrence Wien, 56.

The transaction was as complex as keen-eyed tax lawyers could make it. As soon as his Empire
State Building Associates takes title to the property next December 27, Wien (rhymes with keen)
will sell the building to the Prudential Insurance Co. for $29 million. Prudential, which already
owns the land on which the Empire State sits (worth $17 million), will turn right around and lease
the building and land back to the Wien syndicate for 114 years. Advantages for Prudential: a 7%
return on invested capital and a way around a New York law that limits Prudential's investment in a
single piece of real estate to less than $50 million. Advantages for Wien: the $29 million from
Prudential can be applied toward Colonel Crown's selling price, thereby reducing the actual cost to
the syndicate to $36 million, and the annual lease payments ($3,220,000) to Prudential can be
written off as a business expense.

A Thousand Partners. The Empire State deal is typical of Lawrence Wien's style of operating on
high-rent turf around the country. Columbia-educated, Wien got into commercial real estate in
1949 when he gathered a small group of investors to buy a two-story building for $165,000. Broker
on the deal was Harry B. Helmsley, chief of the Manhattan broker-management firm of Helmsley-
Spear. Wien and Helmsley have been allies ever since, have parlayed their original venture into a
$600 million real estate empire that includes New York's plush Plaza hotel and the more plebian
Taft, Cleveland's Leader Building and the Palm Beach Towers. From their handsomely appointed
offices in New York's skyscraper Lincoln Building, both Wien and Helmsley have been staring out
at the Empire State for years. Said Helmsley last week: "I think we have always wanted the Empire
State; it gets into your blood when you look out of your window and see a building you do not
own."

Heart of the Wien-Helmsley technique is large-scale syndication—a maneuver that they pioneered.
Syndication gives a number of people a chance to own property none of them could afford singly,
and often yields investors as much as 10% a year on their money, far better than most stocks.
Above all, since a syndicate of as many as a thousand members can still legally be called a
partnership, there is no corporate income tax to worry about. In the case of the Empire State, Wien
even syndicated the $4,000,000 deposit required. He himself put up only $500,000—a relatively
small sum compared with the $3,000,000 that lawyers and real estate brokers stand to collect as
fees on the transaction.

Chow in the Sky. Wien, who has a hand in the operation of nearly all his syndicated properties,
insists that he is not a speculator. "We buy for permanent investment," he declares, "and can only
sell a property with 100% consent of the investing partners." Among his plans for the Empire
State: to open a luxury restaurant beneath the highly profitable ($2,000,000 a year) observation
deck, plant trees around the base of the building, brighten its cavernous lobbies, and complete the
air conditioning of its 1,750,000 sq. ft. of rentable space, which currently has a highly satisfactory
99% occupancy.

About Larry Wien


(This was sent to me recently and I thought this group of current owners might be interested.)

Lawrence A. Wien, 83, Is Dead; Lawyer Gave Millions to Charity

Mr. Wien, a founder and senior partner of the 60-year-old Manhattan law firm known today as
Wien Malkin & Bettex, was a 1925 graduate of Columbia College and received his law degree two
years later from the Columbia Law School.

He was generally recognized as a pioneer in real-estate investment syndications. In 1931 he and
three partners each put up $2,000 to buy a small apartment house in Harlem. From that early
beginning, he went on to organize syndicates that at one time controlled more than $2 billion
worth of real estate, including many New York City landmarks.

Substantial Realty Holdings

His groups held ownership or long-term leases on the Empire State Building, the Equitable
Building, the Graybar Building, the Fisk Bulding, the Garment Capitol Building, the Fifth
Avenue Building and the Lincoln Building, where he had his offices.

His holdings at times also included major hotels like the Plaza, the Taft, the St. Moritz, the
Lexington, the Town House and the Governor Clinton, as well as substantial properties in
Newark, Palm Beach, Philadelphia, Los Angeles, Minneapolis and Las Vegas.

He was known primarily, however, as a patron of the arts and a major contributor to
philanthropic causes. Over the years he gave millions of dollars to the arts and to civic,
educational and welfare organizations. In October he was again nominated for the National
Medal of Arts by George Weissman, chairman of the Lincoln Center for the Performing Arts.
Mr. Wien, an impressive figure at 5 feet 10 inches and about 150 pounds, called his philosophy
of giving ''intelligent selfishness.'' He said that by contributing to charitable causes, he could see
the results while alive.

'The Fun of Giving'

In an interview in 1982 he noted that he had already provided a reasonable degree of security for
his family, and ''I decided to have the fun of giving my money away.''

And give it away he did. Among his major contributions was about $8.5 million to Brandeis
University, including money to establish in 1958 an endownment fund at the Waltham, Mass.,
institution for tuition, maintenance and travel assistance to 15 foreign students a year. Since the
inception of the Wien International Scholarship, 639 students have benefited.

The very symbol of the university, a statue of Associate Justice Louis Brandeis of the United
States Supreme Court, was commissioned by Mr. Wien in 1956, eight years after the school was
founded.

In 1959 he created a national scholarship at the Columbia Law School that has provided
financial aid to 424 students in the 11 Federal judicial districts across the country.

In 1969 Mr. Wien added $1.2 million to his contributions to the Lincoln Center to help complete
its capital fund drive. He had served as vice chairman and a trustee of the center for almost 20
years. $20 Million to Columbia His donations to his alma mater, Columbia University, came to
more than $20 million over the years, including $6 million toward replacing the university's
crumbling football stadium at Baker Field. The new arena was named in his honor.

Mr. Wien was also extremely generous with his time, serving as president of the Federation of
Jewish Philanthropies from 1960 to 1963 and working each Wednesday at the agency's
headquarters. He continued to serve as an honorary chairman.

He was a trustee of Columbia University from 1964 to 1970 and participated in the Columbia
College Council and Columbia College Fund. The university honored him in 1981 with its
Alexander Hamilton Medal, the highest honor given to an alumnus.

In October Mr. Wien was honored at Brandeis University, of which he was a trustee from 1957 to
1984, serving as chairman from 1967 to 1971. Gravely ill and confined to a wheelchair, he was
the guest of honor at the 30th anniversary dinner celebrating the Wien International
Scholarship. It was his last appearance at the university, where scores of recipients of the full
scholarship surrounded him in a tearful appreciation.

Civic Roles in New York

He was born in New York City and took on many civic responsibilities in the city he said he
loved. He was an official of the City Fusion Party from 1933 to 1935, working to elect Mayor
Fiorello H. La Guardia.

He was a mayoral appointee of the New York City Council Against Poverty from 1966 to 1970. In
addition most of the property he owned was in the city, and for many years he was a patron of
the New York City Ballet, the New York City Opera, the Lincoln Center for the Performing Arts
and the Institute of International Education.

While he contributed millions of dollars to charities, he also induced others, including major
corporations across the country, to increase their financial support for charitable, civic and
educational institutions.

In 1978 he purchased 100 shares of stock in 400 major corporations and then, as a stockholder,
questioned management about how the companies were meeting their reponsibilities in
supporting charitable causes. He founded the Committee to Increase Corporate Philanthropic
Giving, and in two and a half years contributions by corporations that he got in touch with
increased by about $500 million a year.

Another result of this effort is the Wien Prize in Corporate Social Responsibility at Columbia
University, which is awarded to a corporation that is in the forefront of philanthropy. The prize
also provides annual fellowships, awarded in the name of the selected corporation, to two
students at the Graduate School of Business and to three at the Columbia Law School.

Received Many Awards

Mr. Wien received many awards and honors, including honorary Doctor of Laws degrees from
Brandeis University and Long Island University in 1962, Columbia University in 1974, Fairfield
(Conn.) University in 1984 and St. John's University in 1985. He also received honorary degrees
from Canisius College, Buffalo, in 1970 and the Juilliard School this year.
He found time to serve on the boards of numerous public corporations, including Consolidated
Edison, Borden Inc., Jonathan Logan Inc., Morse Shoe and the United Nations Development
Corporation.