Forget Facebook, This Will Be the Year's Coolest IPO

I know, I know, everyone is super stoked about the upcoming Facebook initial public offering. But in all the hubbub over that gigantic offering, investors may have overlooked an IPO that is much cooler than Facebook's.

What could possibly be cooler than owning a piece of Mark Zuckerberg's time-sucking online monstrosity? I'll give you a few hints about one of the key assets of the company I'm referring to:

• It's an Art Deco masterpiece that's widely considered an American cultural icon.
• It's a National Historic Landmark.
• It was once the tallest building in the world.
• It's one of the American Society of Civil Engineers' Seven Wonders of the Modern World.
• It's currently the tallest building in New York City.

I can't imagine that you're stumped, but just in case, the structure I'm talking about is none other than the Empire State Building -- which would be the crown jewel of Empire State Realty Trust if it completes its IPO.

Not alone
Empire State Realty Trust certainly won't be the largest REIT out there. In its filing, the company lists its pro forma total assets at around $2.8 billion. Compare that to mall and shopping-center giant Simon Property Group, which reported total assets of $26 billion at year's end, and wireless infrastructure REIT American Tower, with more than $12 billion in assets on its balance sheet.

Nor would Empire State be the only REIT that owns a marquee property. Vornado Realty Trust has controlling stakes in One and Two Penn Plaza in New York and 555 California St. (formerly, Bank of America Center) in San Francisco. Meanwhile, Boston Properties has majority stakes in the General Motors building in New York and Embarcadero Center in San Francisco.

But come on, we're talking about the Empire State Building here. Besides the Statue of Liberty, there's no structure that I can think of that's more symbolic of this great nation than the Empire State Building. How cool would it be to own a piece of that?

Alas...
Unfortunately, as stoked as I'd be to call myself a part-owner of the Empire State Building, there are some serious reservations that will likely keep me away from the REIT's IPO.

First and foremost, the structure of the IPO isn't favorable at all to new shareholders -- an interesting aspect that Empire State Realty shares with Facebook. However, whereas Facebook's dual-class share structure gives class B shareholders 10 votes to every one for class A shareholders -- thereby granting far more voting control to insiders than their economic interests should allow -- Empire State Realty gives class B shareholders 50 votes per share.

But it doesn't stop there. In fact, there's a whole section of the company's filing titled "Substantial Benefits to the Supervisor and its Affiliates." That section includes the company's setting up golden parachutes and pay plans for management that "may exceed the benefits that they would expect to derive from the subject LLCs or the private entities if the consolidation does not occur" as well as repayment of a loan on a property not included in the new company and assuming liability for the officers for actions taken in the past.

Many of the insiders with lesser stakes see the IPO as so one-sided in favor of the chairman, CEO, and president-to-be and his family that they're suing to stop the offering.

That's not all
I hate to keep raining on this parade, but it gets worse. I recently took a look at a bunch of dividend stocks and concluded that while broadly there is still good opportunity in that segment of the market, there are stocks that are distinctly less attractive. In fact, three of the stocks I put in that latter group were REITs -- Plum Creek Timber (NYSE: PCL), Kimco Realty, and Ventas. But they're not alone among REITs as Boston Properties, Vornado, and Simon Property Group all have yields lower than historical levels coupled with above-average valuations.

Not that it should be surprising. Over the past five years, the Dow Jones U.S. Industrial and Office REITs Index has substantially outperformed the benchmark Dow Jones Industrial Average (INDEX: ^DJI).

Dow Jones U.S. Industrial & Office REITS Index Stock Chart by YCharts

Empire State Realty hasn't released any pricing information on the IPO yet, but the recent performance of REITs suggests to me that when it does price, it's likely to leave little margin of safety for Foolish investors. And remember, the operators behind this IPO aren't yo-yo techies that might get steamrolled by slick Wall Streeters; they're powerful real estate moguls who will no doubt squeeze every last penny out of the offering. Think of it like the savvy folks at Blackstone cashing in on its IPO back in 2007.

And speaking of Blackstone, it's worth noting that investing in the IPOs that got retail investors really fired up over the past five years has been somewhat of a crapshoot.

 Source: S&P Capital IQ and Yahoo! Finance.

Some of these, notably lululemon and Tesla, have been big winners for investors, but others, like GM and Groupon, have left IPO-date investors wincing.

All in all
As it stands today, as much as it pains me, I'll almost surely take a pass on the Empire State Realty IPO. The structure of the company is very unfriendly to public shareholders and my guess is that the bankers will put a rich price on the offering. I will keep it on my radar however. If outside pressure forces the company to be more shareholder friendly and/or shares are priced at (or fall to) a level that looks like a good bargain, I'd love to jump in.

Luckily, there are plenty of other good investment opportunities already out there. In fact, my fellow Fools have highlighted a bunch of them in the special report "Secure Your Future With 11 Rock-Solid Dividend Stocks." You can get a free copy of that report by clicking here.