Holy Cow! Downtown’s Biggest Leasing Challenge
Lysandra Ohrstrom Sept. 15, 2009, 7:44 a.m.
Just as workers were milling about 100 Church Street’s famously gaudy lobby at lunch hour on Aug. 26, an official from the Department of Buildings began plastering two violation notices in the windows of Bank of America on the ground floor. The citation faulted “signage,” in this case a racy advertisement for a teenage television series stretching around the corner of Church Street onto Park Place.
The violation was a minor incident compared to the problems that 100 Church has encountered since the autumn of 2001. But it was a fitting end to a particularly bleak week for a building that has been plagued with bad luck.
The day before the DOB’s ill-timed citation, The Observer broke the news that the Sapir Organization had handed over to one of its creditors, SL Green, the management and leasing duties of the 21-story office tower.
Later that afternoon, Crain’s reported that SL Green was foreclosing on 100 Church and had scheduled a private auction for Oct. 15. In 2009, SL Green and Gramercy Capital purchased the bulk of the building’s $85 million mezzanine debt from Sapir’s primary lender, Wachovia. (The Sapir Organization declined to comment for this article and SL Green declined to answer questions about the auction.)
Sapir is not the first developer to default on its loan payments this year, nor is 100 Church the only building to be put on the auction block. But few other commercial properties have such a fraught history.
A BIG, BOXY, glassy structure that occupies one square block of the Financial District, 100 Church was designed by the prestigious firm Emery, Roth & Sons and finished in 1959. Sapir, led by father and son Tamir and Alex Sapir, bought the 1 million–square–foot building in 1997 for $55 million, according to CoStar. Its previous owner, the Church Madison Corporation, filed for bankruptcy in 1994, according to city records.
Since the tower fetched nearly twice that in 1984, it looked like a good deal for the Sapirs. The New York Times reported in August 1984 that Larry Silverstein’s former brother-in-law and partner, Bernard H. Mendik, paid $116.5 million for 100 Church in a joint venture with the Equitable Life Assurance Society of the United States and the investment banking firm of Allen & Company. Mr. Mendik told The Times that he’d be able to spruce up the shabby tower in three months. “If I have the opportunity to convince tenants that a used Rolls is better than a new Cadillac, I’ll get them,” he said.
At first it looked like the Sapirs’ gamble might pay off. In 1998, Bank of America signed a $65 million lease for six floors.
Then came Sept. 11, 2001. The building was only a few blocks north of the World Trade Center, and the attacks triggered an exodus from 100 Church.
Only three tenants returned after 9/11—one of these, the Jewish Émigré Association, is rumored to be occupying the 16th floor “by the grace of Tamir Sapir himself,” according to an Observer story from March 2009—and the building has remained about 50 percent vacant.
Along the way, brokers have come and gone and prospective tenants have balked. In 2005, a group of toy companies walked, followed by the Omnicom Group in 2007, and Newsweek in 2008.
In 2006, the Sapirs flirted with the idea of a residential conversion, but opted to remodel the interior instead in the hopes that their prospects would rise along with the then-booming commercial market. They hired Cushman & Wakefield to re-market the building in 2006, and dropped them for CB Richard Ellis a year later.
Neither a new broker nor crystal chandeliers and fountains in the lobby have attracted new tenants. Lawsuits filed by CBRE and Newmark Knight Frank brokers over lost compensation have also done little to enhance the building’s reputation.
In the spring of 2008, the Sapir Organization announced a major facade makeover that would replace the building’s dated blue brick exterior with black granite, as well as update its 50-year-old window panes. It proclaimed the face-lift part of “the re-birth of Downtown New York.”
Of course, Sapir’s financial troubles go back further than 2001. Sapir took out a $24.175 million mortgage with Fleet in December 2000, and was released from the agreement less than three years later after failing to make scheduled payments, according to the termination document filed with the city registrar in March 2003. Salomon Brothers Realty released Sapir from a $10.5 million mortgage in 2001, after it failed to make scheduled payments. In October 2007, the Sapirs refinanced their $145 million mortgage with Wachovia with a $255 million loan.
This winter it looked like the Sapirs’ luck might be turning when the Claremont Preparatory School and a data management company announced two new leases at 100 Church. Claremont’s parent, MetSchools Inc., however, refused Sapir’s request for an extension in April and forfeited more than $150,000 in lawyers and architects’ fees related to the 255,000 square feet it had planned to take, according to a source with knowledge of the negotiations. In August, Sapir filed a suit against SL Green and Gramercy Capital for allegedly delaying their approval of Claremont’s lease to prevent Sapir from qualifying for a loan extension.
The suit was dropped in mid-August. “I’m not sure what the sticking point was with the lender,” the source said. “I’m not pointing fingers, but their side couldn’t deliver on the lease agreement they signed. It’s unfortunate that [Alex Sapir] really didn’t own the building, the bank owned the building.”
S.L. GREEN’S EXECUTIVE vice president and leasing director, Steve Durels, told The Observer in the last week of August that the firm was hunting for a broker to market the building’s 12 unoccupied floors. “We’ve got about 650,000 square feet to lease up,” he said, though adding that SL Green is not marketing just yet. “Right now we’re getting our arms around the details of the building … and interviewing respective agents in the brokerage community.”
Despite the changing of the guard, Tungsten Properties is still advertising 150- to 3,000-square-foot, “fully-furnished” office suites for $500 a month at 100 Church on its Web site. The listing promises “no credit check.” The broker confirmed that the space was still on the market, though the asking rent has recently risen to $1,000.
Huge “For Rent” banners still hang in the window of the vacant ground-floor retail space on Barclay Street, too. The Winick Realty broker marketing the listing declined to comment on anything related to 100 Church.
The building’s current tenants appeared oblivious to the trouble. One employee who has worked at 100 Church since 2001 said she has never noticed a management transition. “Aside from the crystal balls, it’s actually a really nice building,” she said, during a smoke break in late August in front of the non-regulation signage.
“Seriously?,” her companion said. “Have you seen the lobby? They are Swarovski crystal.”