The Real Deal New York

Cabbie s Climb to Buy 11 Madison

In difficult real estate career, Tamir Sapir pieces together big holdings

March 01, 2004
By Stuart W. Elliott

From the small electronics store he owned many years ago on the western side of Madison Square Park, Russian immigrant Tamir Sapir could look up and see the 30-story art deco building at 11 Madison Avenue. It would have never occurred to him that one day he would buy the building for $675 million.

The 2.2 million square foot office tower, an icon of the Midtown South skyline, was home to Credit Suisse First Boston, and existed in what must have seemed like a far away and rarified world for the former cab driver.

That was before Sapir, a 55-year-old with a strong accent, got involved in Manhattan real estate a dozen years ago.

He emerged on the real estate scene in the early 1990s, with cash from an electronics shop that catered to Russian buyers, and which he parlayed into multi-million dollar oil contracts in Russia. He started small in Manhattan – investing only $2.3 million but incredibly snatching up a 20-story building in his first purchase at 80 John Street, a deal done in the depths of the recession of the early 90s.

Last year, in the second-largest building sale of 2003, Sapir bought 11 Madison in the midst of a red hot investment sales market. The sale was second only to Harry Macklowe s record breaking purchase of the General Motors Building for $1.4 billion.

Sapir s short and dramatic climb in the world of Manhattan real estate he has assembled a portfolio of seven million square feet, he said – has not been without its difficulties.

He began buying and renovating buildings with no prior knowledge of real estate – a pattern he had established in other businesses in the past, including electronics and oil.

His purchase of 2 Broadway in 1995 almost destroyed him. Renovations of the building for the MTA were plagued by lawsuits, million of dollars in cost overruns and criminal convictions, including the conviction of the man who oversaw his real estate empire, Frederick C. Contini. Only in November did law enforcement agents conclude both Sapir and the MTA had been “victimized” by outside parties in the ordeal.

As he walked through 11 Madison Avenue on a weekday morning recently, Sapir was greeted by a few building workers, but was mostly anonymous amidst the bustle of people heading to their offices. He is largely an outsider in New York real estate circles, too. “I don t know many families in real estate,” he said. “I know they are there. But I don t even know the names.”

During an interview, Sapir is a talkative man who likes to recount his rise to the top from humble beginnings. His loquaciousness caused his advisor to step in more than once to prevent him from talking about business plans that aren t ready to be announced yet, including plans to work with Donald Trump on a residential project downtown that will involve one of Sapir s buildings. “Everything I have inside, it s always on the tip of my tongue,” said Sapir, who said he couldn t say anymore on the Trump project. Trump did not return calls as of press time.

While 11 Madison might have seemed like a foreign object of desire when he owned an electronics store, Sapir said he had his eye on the building since shortly after starting in real estate.

“During my rise in the business, we were good customers for Credit Suisse First Boston,” he said. “I was coming here very often. Every time I was coming to the building, I was always dreaming to have something like this on my own.” All his other buildings, with the exception of 53 Park Place, are relatively modern, and he liked the fact that the building was built in 1932, he said.

With his legal troubles ended in November, and 11 Madison on the market, Sapir was able to buy it, partly with funds that had been placed in escrow for the battles over 2 Broadway.

James DeCuzzi, chief executive for Sapir s Zar Realty Management and former president of the New York City tax commission, said the organization used “what is now known as the Macklowe approach” to acquire the building, referring to the G.M. Building deal last year.

Sapir put down a $20 million down payment “hard,” and with the down payment non-refundable and at risk, “we had but a few short weeks to go to closing, and we did it,” said DeCuzzi, who said the quick closing might have set a record for a property of that size. Sapir s offer beat out a field that reportedly included S.L. Green, Tishman Speyer, Jamestown and RFR Realty.

The building is 100 percent occupied – 85 percent of the space is taken by Credit Suisse First Boston – and there fortunately won t be any renovation work similar to 2 Broadway. 11 Madison underwent a $500 million renovation that was completed in 1997, and it s a triple-net leased property, Sapir said.

When asked about besting some of his rivals who are bigger to get the building, Sapir said, “we don t consider ourselves small.”

Sapir started small, however. He came to the U.S. in 1975 from Georgia in the U.S.S.R., and first went to live in Louisville, Kentucky with his wife and two children. Sapir, who goes by the first name “Tom”, initially started work as a bus driver and at a hardware store.

He soon moved his family to Forest Hills in Queens when he had saved up enough money, and went to work as a cab driver. His decision to enter the electronics business came rather informally after he had just purchased a TV and stereo, and a Russian guy was there to install it.

“Finally, we got all this together and, in the Russian way, you invite the guy to have a little vodka just because we have such a nice buy,” he said. “This Russian guy tells me, you look very nice, want to go in as a partner?” It only took a $10,000 investment to start the business, and soon it was booming. “Russians would get off the plane, and they would say, where is Tom Sapir s store? ” said Sapir. “They could buy a VCR here, sell it in Russia, and buy a house.”

Sapir also came in contact with people like the Oil and Chemicals Minister for the U.S.S.R., who came to his store one day to buy a microwave oven and later would help him out starting up in the oil distribution and other businesses in Russia, which Sapir acknowledged he knew nothing about at the time. “I called my friend and said what should I ask for? ” he said.

Sapir also began to establish contacts through the U.S.-U.S.S.R. Trade Economic Council, which he said put him in contact with executives at Fortune 500 companies who were exploring doing business in Russia, and led once to a conversation with vice-president George H. W. Bush during a flight to Russia.

While there has been innuendo in the past about Sapir s Russian ties, DeCuzzi said such rumors are “facially absurd and long ago categorically denied.”

Today, Sapir s distribution company, Joy Lud Distributors International Inc., remains intact because of a dispute over an oil contract in Russia, but no longer actively does business, DeCuzzi said.

Sapir made his entrance into real estate in 1992 with the 80 John Street purchase.

“We re talking peanuts at first, said Sapir. “But I jumped into starting to buy real estate. I figure how low are those buildings going to go? One day, they are definitely going to go up.”

In 1995, Sapir came across 2 Broadway, a vacant building that was part of the crumbling Olympia & York empire in the dying downtown office district. Sapir bought it for $20.5 million. Four years later, the property was worth more than $200 million.

But the building would also provide Sapir with what he said was the greatest challenge of his life. “It was all over the papers, what sort of hassle we had,” he said. “This was the hardest and most difficult time in my entire life.”

The problems revolved around renovations to the building following a 1998 lease agreement with the MTA. Renovations initially estimated at $135 million cost more than $450 million to complete, and several years of lawsuits took place. In April 2003, Contini, who worked with Sapir before they had a falling out and who oversaw much of the renovation, pleaded guilty to defrauding the MTA by billing it for nonexistent workers, a scheme that prosecutors said had robbed the authority of more than $5 million. Four other men associated with the project have pleaded guilty to similar charges.

In November, Zar Realty and the MTA ended their legal action over the building. Law enforcement agencies concluded that both the MTA and Zar were victimized third parties in connection with the renovation.

Even if he was a good buyer, Sapir was faulted as a poor operator by many. He also missed any signs regarding Contini, he acknowledged. “I was traveling so much, back and forth,” he said. “When I was coming to the office, from the parties involved, it was Mr. Sapir, when are you leaving? You know, what is the expression? When the cat is away, the mice will play.”

DeCuzzi said both Zar Realty and the MTA are still considering further litigation against people involved in the project. “We will be exploring and pursuing appropriate action against third parties, jointly,” DeCuzzi said, though he declined to provide names.

Going forward with the organization, Sapir said there are plans to form an umbrella organization later this year, in which all the businesses will be folded under the title of The Sapir Organization . “All the things we do will be under the family name and logo,” said Sapir.

Sapir has two children, Alex, 24, and Zina, 29, who work in the family business.

And while he doesn t worry about tracking the other New York City real estate dynasties, he appears intent on creating his own.

“I m putting everything for them to handle it in the future,” he said. “For me, my family has to be happy, that s all.”

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