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$1 billion Empire State Building IPO: why it won't be like Facebook IPO

The Empire State Building is set to make a $1 billion IPO, but investors probably won't be as excited as they were about Facebook or other tech IPOs.

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Empire State Realty, which owns and operates 12 properties in Manhattan and greater New York, expects to trade on the New York Stock Exchange under the stock ticker symbol ESB.

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By going public, Empire State Realty will be able to tap the equity markets for capital, something real estate investment trusts have had a lot of success doing, even in a wobbly economy. Marcus & Millichap's index of REITs has doubled since the bottom of the recession.

Commercial real estate has also been improving, particularly in New York. The city's office market bounced back after the financial crisis in 2008 led to sweeping job losses on Wall Street and companies pulled back on space.

The office vacancy rate stood at 10.5 percent at the end of last year, down from a peak of 13 percent in 2009, Nadji said. That is still well above the 6 percent vacancy rate in 2007, but New York's office market remains the lowest in the nation among major metropolitan areas, he said. Rents also have been rising, particularly for prime office buildings.

Still, there's a difference between a unique, historic building and a property that can draw the highest rental rates, says Rob Stevenson, head of U.S. REITS at Macquarie Capital (USA) Inc.

"You can't find too many buildings in this country that are more iconic than the Empire State Building," Stevenson says. "But if you're talking about a trophy building — that's definitely not the Empire State Building."

He says that the skyscraper is not well suited as space for financial services companies and other large tenants, who typically prefer more modern buildings. He adds that its location is not as desirable as a buildingin the Plaza District, an expensive zone in midtown Manhattan.

The Empire State Building's owners have sought to modernize the 80-year-old tower. In 2009, they embarked on a $550 million renovation aimed at making it more environmentally friendly and energy-efficient. The owners said they need $55 million to $65 million beyond 2013 to finish upgrades.

Apart from the novelty factor, will investors see the Empire State Buildingas a good real estate investment?

John Fitzgibbon, founder of IPOScoop.com, which tracks IPOs, says investors won't get a good sense of the value of the IPO until the company provides more complete information on the offering. But he says IPOs by real estate investment trusts generally don't make much of a splash.

"REITs seem fairly valued when they're priced. You don't see any moon shots in the crowd," he said. "I wouldn't expect it to behave as people were talking about Facebook."

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