CBRE to lease Empire State Building.

CB Richard Ellis announced that it will take over as leasing agent for the Empire State Building and a number of other properties owned by the Malkin family, seemingly putting a sudden end to what had grown into one of the biggest feuds in the Manhattan real estate industry.

For years, the building was man aged by Helmsley Spear, who the Malkins bemoaned for their poor leasing performance. Indeed, the Empire State Building often suffered from higher vacancy rates than the overall market.

But real estate experts say the building's leasing team wasn't the only factor to blame. Despite conducting a number of renovations, the building's owners were never able to transform the property into anything more than a class B office property whose floors were divvied up into an ungainly amount of small spaces. As a consequence, the property had difficulty attracting credit-worthy tenants who often seek larger floorplates and who would have made the leasing operation for the building more lucrative and efficient.

The Malkins and Helmsley Spear were locked in a years-long lawsuit launched by the Malkins to try and oust Helmsley Spear as the managing agent of a number of properties, including the Empire State Building.

After losing in an arbitration court in 2001, the Malkins won an appeal only to have that decision overturned in a third court battle.

The outcome of the first appeal went in favor of W&M Properties, the real estate firm in which the Malkins have a controlling stake, because the court found the arbitration panel in the original court case had incorrectly ruled that Helmsley Spear, after a change in ownership that effected the complete reorganization of the company, was the valid successor to a contract to manage W&M's buildings.

Leona Helmsley sold the Helmsley Spear to a partnership between Irving Schneider and the late Alvin Schwartz in 1997 but the court decided that their management contract with W&M should have been found void by the arbitration panel because, under the new ownership, Helmsley Spear had become a completely different company with new "officers, directors, shareholders, management personnel, financial structure and fewer properties under management than (the former) HelmsleySpear."

In addition to the Empire State Building, the Malkins said that Helmsley Spear's mismanaged other W&M buildings 1400, 1350, 1333, and 1330 Broadway.

Anthony Malkin, president of W&M Properties, claimed that the five W&M's buildings under Helmsley Spear's control suffer from high vacancy. To illustrate his point, Malkin referenced the turnaround of 501 Seventh Avenue, a building owned by the firm that up until recently was managed by Helmsley Spear.

"It was 38% occupied when they were running the place," Malkin said in a conversation with REW at the beginning of the year.

"We got them out of there and put in CBRE and now the building is close to 100% occupied."