Illegal spaces: Room for the seedy side of life

This summer a Brazilian madam was arrested in her Midtown condo at 100 West 58th Street. She admitted to running a high-class prostitution business out of her $1.2 million apartment at Windsor Park and said she planned to use the profits to buy a floor of condos at the Plaza with Italian investors.

Prime real estate and the city’s seedy underbelly have long commingled, with houses of ill repute prospering in both gilded districts and downtrodden neighborhoods.

Commercial brokers say they get frequent requests from operators of gambling parlors, brothels and illegal workshops that need space. While most overtures are rebuffed, the underground economy finds places to do business all the same, suggesting that some landlords know when to not ask questions.

“I know landlords who don’t care what you do with your space as long as you pay your rent in full on the first of the month,” said James Famularo, a senior vice president at New York Commercial Realty Services.

“Large landlords won’t even consider it. But if it’s an old New York guy who only has a few buildings, he might look the other way.”

Famularo, who now focuses on brokering spaces for nightclubs and lounges, said earlier in his career he was involved in finding spaces for gambling parlors and dominatrix businesses. He said most gambling parlors tell brokers they run a private club, while dominatrix businesses frequently represent themselves as PR agencies.

“The dominatrix businesses are all over the city, mostly in live-work lofts,” said Famularo. “They have them on the Upper West Side, in Tribeca, in the West 30s.”

Famularo recalled being approached by a woman who claimed to run a rock ‘n’ roll PR company; she said she needed a “cool” landlord.

“So I met her at a space and she had on these black patent leather boots, there were welts on her legs, she had very white skin and black hair. I was like, if you’re a PR firm, you sure don’t look like Lizzie Grubman,” said Famularo. “I heard one of the girls she brought along saying to her partner, ‘This would be a great space for a crucifix.’

“I told them there are three people you should never lie to: your lawyer, your doctor and your broker,” he said.

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Most brokers, however, say they refuse to work with businesses they think are illegal.

“I had an encounter recently with someone who I believe was running a prostitution business, and I wouldn’t touch it,” said Reza Moghadam, an agent with Tungsten Properties. “I wouldn’t be a part of it because I don’t believe in short-term sustenance. I’m working for the long term.”

Moghadam said he would work with an illegal business if he didn’t know they weren’t on the up-and-up, and he said other brokers are willing to look the other way if a landlord has no problem with a tenant’s line of work.

“I had someone in my office recently who was dealing with a gambling parlor, and it didn’t go through because of the client’s financials, but the landlord was fine with the nature of the business,” said Moghadam.

Other brokers said that while they have never been knowingly involved with placing an illegal business in a building, landlords get the final say.

“I relay information to owners, and ultimately it’s their decision,” said Maggie Kent, vice president and managing director for Nest Seekers Downtown. “I think owners are savvy enough that they can see if there’s something wrong with a business, like if they move around a lot. If a landlord gets into a situation with an illegal business and the business gets in trouble, it’s going to hurt everyone’s reputation.”

Kent said the job of a broker is to screen prospective tenants for landlords, who don’t always have time to go through all the paperwork themselves.

“That’s what we’re here for,” said Kent. “If landlords don’t use a broker, they might not know what kind of business they’re getting. But New Yorkers are pretty savvy. They know what’s going on.”

And owners may have been more tolerant of illegal businesses when commercial and residential values in Manhattan weren’t as high as they are now.

“When I started, it was much easier for illegal businesses to find space, but these days landlords don’t want them and they don’t need them because it’s such a tight market for commercial space,” said Daniel Ifrah, who has been an independent broker for 13 years. “Ten, 12 or 15 years ago, though, landlords would take them, usually in Hell’s Kitchen.”

Ifrah agreed with Kent that owners who house businesses they know to be illegal do so at the peril of their own reputation: “If a landlord is willing to let in an illegal operation, he’s shady himself.”

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