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Empire State Trusts Hits Public Markets

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Empire State Trusts Hits Public Markets

While the average Joe may be millions away from living in the skyscrapers of New York City, the everyday investor may now have the ability to invest in some of the most iconic properties in the city. On Wednesday one of the most coveted reality Trusts,The Empire State Realty Trust Inc (NYSE:ESRT) said it sold 71.5 million shares at $13 a share, the low end of its expected range of $13 to $15 a share. The company was able to successfully raise a whopping $929.5 million as a result of the deal. At the $13 share price, the company’s market value is about $3.2 billion, and the proceeds from this deal make it the largest real estate investment trust IPO since October 2006 The Empire State Realty Trust owns the Empire State Building and 18 other properties in New York and Connecticut. As of the most recent figures, the portfolio is at 83% occupancy, low according to many.

The company will be registered as a real estate investment trust, or REIT. If you are not yet familiar, REIT’s essentially pay no income taxes in exchange for paying out nearly all of their income as dividends. As a result, investors of REIT’s typically earn substantial dividends, far above the low yield treasuries. Using the preliminary figures the trust will have an initial annual dividend of 34 cents a share, not bad considering shares are issued at $13. At the $13 per share price, the annual dividend yield is about 2.6 percent. While 2.6% isn’t bad, the average yield for U.S. office REITs currently stands at 3.3 percent.

Early in the session, shares of the trust traded to the upside by 2.5% to $13.33 per share. It will be interesting to see if shares can trade into the midrange of the expected range over the coming weeks.

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