By Ilaina Jonas

(Reuters) - Investors of the company that owns the Empire State Building have approved a plan to take the iconic tower public, clearing the last major hurdle to real estate mogul Peter Malkin's attempt to retain control over a property that has been in his family for more than five decades, while allowing investors to cash out.

Malkin Holdings LLC first filed its intention in November 2011 to fold the 102-story New York office tower into a newly created real estate investment trust known as the Empire State Realty Trust Inc.

But it faced stiff opposition from a small group of investors who objected, in part, to how their stake was valued, and sued.

In a U.S. Securities and Exchange Commission filing Wednesday, Malkin said investors representing at least 80 percent of the ownership units voted in favor of the plan, and the ballot was still open.

Crossing that threshold would allow the Malkin family to force any holdouts to acquiesce to its plan. The REIT has estimated it will raise $1 billion in proceeds from an initial public offering, for which a date has yet to be set.

The investor approval comes as prices of top office buildings in major U.S. cities have been rising, recovering ground that was lost in the aftermath of the financial crisis. Prices are now one percentage point above their 2007 highs, according to the Green Street Commercial Property Price Index as of May 6.

The Empire State Building, which was built in 1931, held the distinction of being the world's tallest tower for four decades after its completion. One of the most recognizable features of the New York City skyline, it is being renovated, and as of September 30, was 68.5 percent leased.

Each of the 3,300 units sold to investors in the early 1960s at $10,000 apiece, could be worth more than $320,000 each, according to the SEC filing. At the end of last year, 2,824 investors held the units.

The building was valued at $2.33 billion, after debt, while the REIT, which will also have other properties, is estimated to be valued at about $4.15 billion, after debt, according to an appraisal in the summer last year.

After an IPO, Malkin's stake is expected to be worth as much as $714 million. The Leona Helmsley estate, a major investor in the company that sublets and manages several of the properties proposed for the REIT, could see its stake valued at about $1.03 billion. It would reap about $672 million of the total in cash from the IPO, according to values based on the appraisals.

Minority investors who sued lost their last court battle recently, when a New York State judge upheld the forced buyout provision, which requires holdouts to either sell their units back for $100 per unit or vote for the plan. The investors appealed the judge's decision. Malkin has not yet triggered the buyout provision.

Richard Edelman, one of the leaders of the opponent group, said his family's vote would not be cast until the appeals court issues its ruling.

LONG HISTORY

The Empire State Building's complicated ownership structure goes back more than 50 years, when attorney Lawrence Wien, the father-in-law of Peter Malkin, pioneered some of the first real estate syndications that allowed small investors to own a piece of big office buildings, which were once only available to the very wealthy.

Wien formed a partnership, Empire State Building Associates, in 1961 to raise money by selling 3,300 ownership units at $10,000 apiece to buy the 114-year master lease on the building. As part of the offering, the lease was sublet to Empire State Building Co, which he and real estate mogul Harry Helmsley created to control the property.

After Wien died in 1988, Peter Malkin was joined by his son Anthony the following year to manage the investment, along with several others. The elder Malkin is now chairman of Malkin Holdings and his son is president. Anthony Malkin will become chairman and chief executive of Empire State Realty Trust.

Malkin launched the plan to make the Empire State the centerpiece of the new REIT with more than 18 properties in November 2011.

A REIT is a company that generates most of its revenue from either rent or mortgage payments. It is exempt from most corporate taxes if it passes on at least 90 percent of its taxable income to shareholders.

(Editing by Jeffrey Benkoe, Paritosh Bansal and Bernadette Baum)