Forbes: The Money Problems of Manhattan Real Estate Mogul Tamir Sapir

Keren Blankfeld, 9/24/10

He left the Soviet Union in 1973 as Temur Sepiashvili, a 26-year-old Russian who ended up driving a taxicab in Manhattan to make ends meet. His life soon became the stuff of American dreams.

He changed his last name to Sapir and built a real estate business in New York that gave him a net worth of $2 billion at the height of the 2007 real estate market boom. In the ultimate acknowledgment of making it, this kid from Tbilisi in the Republic of Georgia, now 63, scaled The Forbes 400 list four years running.

Today Tamir Sapir’s circumstances are far less exalted. A host of creditors are suing him for repayment of loans totaling some $340 million, and real estate brokers are claiming he brazenly stiffed them on commissions.

In January SL Green Realty Corp. foreclosed on a Sapir-owned 1-million-square-foot building in Manhattan’s financial district after he had defaulted on loans of at least $85 million. He’s even accused of not paying for things like a custom mat by the American Paper Towel Corp., which claims in a suit that the Sapir Organization owes $23,298.64 plus interest for goods sold for the foreclosed building at 100 Church Street.

By our estimate, Sapir’s net worth has fallen to around $700 million, still wealthy indeed but not nearly enough to make this year’s rich list.

A tough, unloved landlord, a pariah to many brokers, Sapir looks like yet another credit-starved developer fallen prey to endless refinancing at the wrong time. Yet in a strange twist, his lawyers in one lawsuit are offering a surprising explanation for his troubles. They claim in court that Sapir has, according to a 2008 medical examination, suffered from a “deteriorating mental condition” since at least 1998 that left him vulnerable to shrewd bankers and lawyers out to take advantage of him.

This particular suit, filed in May, claims Sapir hasn’t repaid a $66 million loan he took out in 2006 to develop a 47-story residential condominium in Manhattan’s financial district. Sapir personally guaranteed the loan, from a Blackstone-controlled fund, at 18% interest, and later revised it to an even steeper interest rate of 20%.

Why would he do that? His lawyer, Stephen B. Meister, said in court in August that Sapir’s attorney gave him bad advice because he stood to gain $15 million to $16 million from the deal–and Sapir lacked the mental capacity to understand the loan’s conditions. “He had not written anything other than signing his name for ten years,” Meister told the court. A recent examination, Meister tells FORBES, confirms Sapir is suffering from an incurable degenerative brain illness.

This defense astonished the lender, GSO Re Onshore, which claimed in a letter to the judge that Sapir had never before raised the issue. Sapir’s previous lawyer, Robert J. Ivanhoe, has denied the allegation that he misled his client.

Sapir has also tossed accountability over to his 31-year-old son, Alex, who has been running the Sapir Organization since 2006. In a 2009 videotaped deposition involving a pending suit in Las Vegas, Sapir is asked about a $21 million development deal he is accused of reneging on.

“My son is doing the business,” Sapir answers. “‘Papa, give me money,’ and that’s it.” Sapir says he has no knowledge of the property’s price or its appraisal, explaining: “My son–I speak little English. My son is in the business. I am the money man, and that’s it. Why am I expected to know so much?”

The two Sapirs declined to speak to FORBES. In court papers filed July 30, 2009 in the Las Vegas suit, Alex pleaded poverty for the Sapir Group. He said that the “defendant is more than $250 million in debt, its assets are not liquid and are not readily saleable, and it currently has only approximately $4,000 in cash and cash equivalents.”

Over the years his dad has certainly spoiled himself. He’s enjoyed a $5 million Trump Tower apartment and a penthouse overlooking Acapulco Bay, not to mention the Versace-accented 150-foot yacht called Mystery

(This was the yacht that he used to illegally import rare animal carcasses into the U.S., which resulted in a $150,000 fine last year and his guilty plea for violating the Endangered Species Act.) He has developed a penchant for jet-setting and wearing expensive fashion labels. A long way from Tbilisi.

After driving a cab when he came to New York and famously borrowing $10,000 against his medallion, he opened an electronics store on Fifth Avenue. The store became a hot spot for Soviet dignitaries and trade delegations, according to Sapir’s official bio, and eventually he became a key foreign partner for the emerging oil industry in Russia.

Then he struck real estate gold. In the mid-1990s 2 Broadway was a 32-story building near Wall Street that, originally built in 1959, was badly in need of renovation. Sapir snatched it for $20 million. “

As far as grand slams in Manhattan real estate go, that’s way up there with [Donald] Trump’s purchase of 40 Wall Street,” says Dan Fasulo, head of research for Real Capital Analytics, a real estate research firm. “That’s really what made him.” In 1998 the Metropolitan Transportation Authority agreed to sign a 49-year lease for 2 Broadway, for which it today pays $23.1 million a year.

Just two years later that relationship soured in a barrage of lawsuits involving maintenance and renovation of the building. The MTA later announced that investigators concluded that both parties were victims of fraud and criminality “at the hands of certain third parties.”

Sapir, meanwhile, refinanced the valuable building a couple of times, eventually for $440 million, and apparently used the proceeds to buy other properties–some of which he in turn refinanced before the real estate bust. In 2003 Sapir bought 11 Madison Avenue, a prized building near Madison Square Park that now houses tenant royalty, including Credit Suisse .

The building cost him and a partner $675 million. Then in 2006 Sapir refinanced the building for $806 million. Sapir also owns two residential apartment buildings in downtown Manhattan, a 950,000-square-foot commercial building in midtown and another, eight-story commercial building nearby on Fifth Avenue that serves as the company headquarters.

Sapir isn’t likely to win any Landlord of the Year awards. Three brokers–including one involved in the recent $44 million sale of his Fifth Avenue mansion to Carlos Slim Helú–allege in suits this year that Sapir stiffed them on commissions ranging from $164,076 to $880,000.

Sapir’s latest project, the new hotel-condo Trump SoHo in Tribeca, is also embroiled in a lawsuit. Trump SoHo had a highly publicized opening in April, but so far it’s been a dud: 15 buyers filed suit in August seeking $1.75 million in deposit refunds and damages, alleging they’d been misled regarding how many units had been sold.

Will Sapir be able to untangle himself from this legal mess? It wouldn’t be his first time. In his 2001 divorce proceedings a judge ordered Sapir not to gamble large sums of cash prior to a settlement. Sapir did gamble–and won $1.1 million. “No harm, no foul,” he told the judge, who let it slip.

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