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In October 2013, Empire State Realty Trust Inc., headed by Anthony E. Malkin, completed its IPO, the second largest of its kind in REIT history and Time magazine's second most important IPO of 2013 (#1 was Twitter). The offering included more than 82.2 million shares of its class A common stock at a public offering price of $13.00 per share, representing an interest in a portfolio that includes the Empire State Building. In all, at the time of closing, Empire State Realty Trust's portfolio totaled 8.4 million square feet, which through acquisitions on July 15, 2014, expanded to 10 million square feet.

Malkin sat down with EY's Global Real Estate, Hospitality and Construction Leader Howard Roth to discuss the path to public status and the benefits shareholders are receiving as a result.

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HOWARD ROTH: Tony, the Empire State REIT was one of the most complex IPO rollups ever. What were the top two or three challenges you faced?

TONY MALKIN: As there was a lot of uncharted territory, the entire process took over three and a half years from start to the IPO. To begin with, we previously did not have audited financial statements. We had two different groups, three public registrants and 20 private entities. For this reason, in the first couple of months we had to make several important decisions that set the course for the entire process. The first was to solicit the private entity investors separately, because the public registrants were subject to a different set of rules and guidelines.

We then worked successfully with the SEC for about a year before our offering was declared effective. One of the challenging elements of the transaction was managing the media coverage, which we felt was not always accurate and created additional challenges in working with our investors.

During the process, we spoke to practically every one of more than 5,000 individual investors. I spoke at least once to every single investor who voted “no,” and I spoke to many investors several times. In the end, while this process was extremely time consuming, there was very strong support for our proposals, and investors voted overwhelmingly in favor of them.

In general, the transition to the public sector has been fantastic. We now have one set of corporate governing documents and only one balance sheet. This has given us a unified balance sheet, access to a broad variety of debt and equity capital markets options and the ability make decisions and act more timely and efficiently. We also have enjoyed having a corporate board that includes six independent directors and me. All of this has been a terrific transition for our company.

ROTH: It's a great story, and obviously a very successful transition. With that being said, give us some background on the existing portfolio and your vision for the future, especially given the competitive landscape in the New York commercial real estate market.

MALKIN: We went public primarily to bring a modern operating structure to the investments that had been created by my grandfather, father and me. Since going public we've continued to redevelop our portfolio, and in the second quarter we reported a 35% increase on new Manhattan leases compared to expiring fully escalated rents.

We believe we have immense embedded growth within our portfolio, approximately 2.3 million square feet to be redeveloped and leased at higher rents in Manhattan alone, with 1.6 million outside of the Empire State Building. For example, in August 2006, the average in-place rent per occupied square foot for the Empire State Building was $26.50. Today, at the Empire State Building, across our Manhattan portfolio and even at one of our suburban properties, we are signing leases at more than twice that rent.

Throughout our portfolio, we've redone windows, elevators, hallways, bathrooms, electric distribution, hot/cold wastewater risers and roofs. We believe we'll see tremendous growth over the next couple of years, and we're extraordinarily well-positioned to deliver significant embedded growth to stakeholders. We want to continue to capitalize on the value that's inherent in our portfolio. We will also acquire when opportunities present themselves.

In terms of the overall market, New York is doing well, with continued growth prospects. New York is also attractive to young, intelligent people going into banking, advertising, media and technology. There is a demographic shift, and people are marrying /partnering later. This means more two -and three-income households with no kids that want to live in Manhattan. This is a positive for New York over the longer term.

ROTH: Tony, you did one of the largest LEED-certification retrofits when you upgraded the Empire State Building a few years ago. What are your views on sustainability?

MALKIN: I am not a fan of LEED. When I compare money spent on that to what we earn and what we save our tenants with our ground-breaking work on energy efficiency, LEED has come up consistently short. Energy efficiency is a great opportunity to show terrific investment returns for your companies, your clients, and your tenants. We integrated energy efficiency into our overall upgrade program at the Empire State Building. It was under 4% of the cost of the total project, with a three-year payback for that incremental cost, reducing our total energy consumption by what we now project to be more than 40%.

In our buildings, the tenants who invest the additional funds in energy efficiency are getting 25% to 30% IRRs over their leases' 10-to-15-year lives. Focusing on plug loads, HVAC and lighting loads that are tied into building central energy management systems provides a huge opportunity to deliver savings to the tenants' bottom line. Along with our suite of sustainable practices in recycling, safe cleaning and pest control solutions and healthy building materials, it is a competitive advantage for us in attracting tenants.