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Troubled 100 Church rebounding

<i>Tenants Newsweek, Niche Media would add cachet</i>

While much of Lower Manhattan’s commercial office market has roared back to life in the last few years, 100 Church Street has remained nearly half-empty amid questions about its location, infrastructure and controversial ownership.

In November, Omnicom Group signed a lease for 183,000 square feet of space at the famed “Wedding Cake” tower at 195 Broadway after talks fell apart with the Sapir Organization, the landlord of 100 Church Street. Three years ago, the Toy Industry Association pulled out of an agreement to lease 300,000 square feet at the building, after publicly announcing the deal.

But the tide seems to be rising for the Lower Manhattan building, which in 2006 had the dubious distinction of having the most unoccupied space of a completed office building in Manhattan.

While 600,000 square feet of the building’s 1.13 million square feet is still empty, one lease for 45,000 square feet with Niche Media is already signed. And at press time, Newsweek was close to a deal for 200,000 square feet there — a move that could help put a stamp of approval on the property and dilute much of the drama surrounding the controversial Sapir Organization.

“You can’t get too much better than Newsweek, especially in the publication and media world,” Alex Sapir, president of the Sapir Organization, told The Real Deal.

He confirmed the Newsweek talks and said they’ve been going on since Thanksgiving; Newsweek’s lease at 1775 Broadway is up for renewal. Newsweek would not comment on any negotiation specifics, but spokesperson Jan Angilella wrote in a statement that the magazine is “looking at several locations, and 100 Church Street is one of them.”

CB Richard Ellis, which is representing the Sapir Organization at 100 Church, also declined to comment specifically on the negotiations, but broker Brad Gerla cited the multimillion-dollar upgrades that Sapir announced in 2006 as making a significant difference. “The tenants are responding to the improvements he’s made in the building,” Gerla said.

The pending turnaround of 100 Church could be an important achievement for the Sapir Organization, which has had less than stellar relations with the brokerage community and has been entangled in some high-profile legal battles.

The company was founded by chairman Tamir Sapir, who emigrated to the U.S. in the 1970s from the former Soviet Union via Israel. The former taxi driver made millions by trading oil and fertilizer with the Soviet Union in the 1980s and then entering the New York real estate scene, where he made a vast fortune. His net worth is estimated at more than $2 billion.

In 2003, Sapir’s Zar Realty Management settled a series of suits and countersuits with the Metropolitan Transportation Authority, which stopped paying rent amid allegation that the firm reneged on plans to renovate 2 Broadway, where the agency had office space. Sapir also got into a number of legal disputes with the brokerage community, amid allegations that the company was stiffing brokers on commissions.

“They didn’t play very well in the brokerage community,” said one downtown broker who asked not to be identified.

Meanwhile, tenants at 100 Church have complained of major problems in the building, including faulty elevators, single-pane windows and poor maintenance in general. However, when Tamir’s son, Alex Sapir, was named president in 2006, he set out to repair the company’s image and to bring the Class B tower up to higher standards.

“We never really marketed the building before,” said Sapir, whose company has owned 100 Church Street since 1997. “We started marketing the building in 2006. That’s when the downtown boom started to happen.”

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The company, he said, considered a plan to convert the building into rental apartments, but when the downtown market started to pick up, it decided to upgrade the building for commercial tenants instead. Sapir said more than $20 million is being spent to replace the elevator cabs and improve heating, cooling, ventilation and mechanical systems.

The building itself was designed by architects Emory Roth & Sons in 1958 and has housed major investment firms, including the Bank of New York and Merrill Lynch. Both companies moved after the World Trade Center attacks, largely because of damage to the building.

The New York City Law Department was displaced
after the attacks too but moved back in, during 2002, and signed a new lease in February. Gerla said CB Richard Ellis is in talks with another client for an 80,000-square-foot lease on the site.

Brokers said the building, which is around the corner from Ground Zero, has suffered in part from its location. “It’s really in kind of a no man’s land from what people really see as the downtown Financial District,” said broker Paul Bostick of Bostick Realty.

Other executives said that while 100 Church Street has been trying to upgrade, there have been a few prime locations that still had availability.

“I think it’s just the location of where the building was post-Sept. 11,” said Joseph Jerome, principal of JEMB Realty, which owns several major buildings including 75 Broad Street and the Westinghouse building at 150 Broadway. “At the time, there were better-located buildings that had big spaces available.”

Brokers said now, the economics of Midtown office rents are playing as big a part in 100 Church Street’s pending turnaround as anything.

Asking rents in Midtown commanded a 61 percent premium over Downtown rents, the largest gap in 12 years, according to a fourth-quarter report by Cushman & Wakefield. Overall asking rates averaged more than $75 for Midtown versus $46 for Lower Manhattan.

Meanwhile, the Class A average asking rent climbed more than 25 percent compared to a year prior, to a record $83.40 per square foot in Midtown. Class A office space rose 18 percent to $53.16 in Lower Manhattan, while the vacancy rate fell to 5 percent from 6.9 percent in the fourth quarter of 2006.

Sapir said asking rents in his building, a Class B tower, average about $46 per square foot on the lower floors and in the $50s for upper floors.

Brokers said the deal that paved the way for negotiations with Newsweek was the 10-year lease inked by Niche Media, which publishes Gotham, Hamptons and other luxury magazine titles. The lease was signed in September. Niche, currently at 257 Park Avenue, is taking 45,000 square feet of space at 100 Church and will begin moving in by the summer. And the company got a good deal. It will initially pay $37 a square foot; after its fifth anniversary, that will rise to $39 a square foot.

Niche chief executive Jason Binn said one of the key
factors in the firm’s relocation decision was the lure of luxury brands like Hermès and Tiffany that are sprouting up in the area. He said he felt the magazine needed to be in close proximity to those brand names.

He praised Sapir and said, “Alex is really committed to making this property a Class A property that will have the most prestigious tenants in town. He’s creating for the real estate world a lot of sex appeal for this building and this area.”

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