What the Internet boom gaveth, the bust taketh away. That's the lesson that the Parish of Trinity Church, a Manhattan landlord since 1705, has learned.

For Trinity, the boom looked like a godsend, filling newly renovated office space in 23 former industrial buildings at rents as high as $50 per square foot. "The dot-coms were to the rental market what the Japanese were to the sales market," in the 1980s boom, said Trinity's director of leasing, Stephen Heyman.

Internet-related companies weren't the only renters clamoring for space in a tighter market, said Heyman, "but they were leading the charge, particularly in terms of pricing."

Now that the boom has collapsed and Internet companies are failing or cutting back, the parish is struggling to re-rent spaces, cutting prices by 15 percent and offering to pay for renovation costs that a year ago tenants would have borne.

The downturn for the historic Wall Street church, which got into real estate business when England's Queen Anne turned over 215 acres of Lower Manhattan to the then-Anglican parish, is part of a larger trend. Insignia/ESG, a New York brokerage, says that in Midtown South, which includes Hudson square, the area near the Holland tunnel where Trinity's holdings lie, vacancy rates have risen to 8.4 percent. That's more than double the record low hit last summer.

Most of Trinity's office buildings were built in the 1920s and 1930s and were intended for printers and other industrial businesses. The parish started to convert the buildings to office space in the 1980s, attracting advertising agencies and other tenants who would pay more than the $6 to $15 per square foot that the printers had paid. In 1996, the Religion News Service estimated that the properties produced annual rental income of $60 million. Heyman wouldn't comment on that figure or provide a current estimate.

High-Tech Amenities

With the Internet boom, demand for the downtown location rose and Trinity put money into new wiring and other upgrades to attract the new clientele. The company committed $70 million to renovate its flagship property, One Hudson Square, a 17-story, 922,000-square-foot building erected in 1929. The triangular building was almost fully occupied last year, after Trinity put in a marble lobby and began construction on a 90,000-square-foot, there-story "penthouse" on top of the existing structure.

Now, the entire sixth, seventh, ninth and 11^th floors on One Hudson Square are available, either directly or through sublease. In addition, parts of the 10^th, 14^th, 15^th and 16^th floors are being marketed by Trinity or by the prime tenants. The top floor had been held from the market to allow for the penthouse project.

Companies trying to sublease space include StarMedia Network Inc., an Internet service that targets Spanish and Portuguese speakers, and Getty Images Inc., which provides photos, logos and other images for advertisers. StarMedia has announced plans to cut 200 jobs, or 25 percent, of its workforce and Getty Images, which missed revenue projections by 5 percent in the March quarter, is also cutting overhead.

James Meiskin, a broker with Plymouth Partners, Ltd., which is representing Getty, says the prospects are dim. "The offers are not coming in, my friend," he said. "It's a stale market right now, and I think it will remain that way until at least the first quarter of 2002.

Peppercorns

Trinity, however, is in a better position than most real estate operators. As part of the 1705 grant, the monarchy assessed the parish a rental of one peppercorn per year. When Queen Elizabeth II visited New York in 1976, Trinity gave her 279 peppercorns in recognition of the lease.

"They have a cost basis that's better than everybody else's," said Adam Foster, a senior managing director at Insignia/ESG, a New York brokerage. And the parish carries no debt on its properties.

Even so, the Parish could feel the pinch of falling rents. "They put a lot of money into these buildings, especially one Hudson, so they need a certain rent level in there."

The parish uses the profits to fund $2.5 million in missionary and social grants, which Heyman said was a fraction of the church's total charitable work around the globe.

The local charities include the Heuss House homeless center and St. Margaret's House, an assisted-living facility. Heyman said there are no cuts to the budget for these charities. "It's not possible to expand it at this point," he said.

Heyman says he's still confident that the high-tech clientele will come back. "This is a long-term investment," he said. "The Internet didn't go away. It's just that the players are changing. The Internet gets stronger every day."

Even if the rents drop further, they have a way to go before they sink below pre-boom levels. According to the latest data from CoStar, rents in the Hudson Square area, where Trinity controls about half the office space, still average $39 per square foot, versus $19 in 1998.

And, Heyman said he's gradually remarketing the space vacated by Internet clients. At 304 Hudson Street, where the only traces of former tenant, an Internet video-production outfit named Jumpcut Inc., are the decor (taxi-yellow doors, opaque plastic room dividers and exposed ducts) and piles of abandoned magazines, he has found a new non-Internet tenant. The National Quotation Bureau, the 97-year old publisher of the daily Pink Sheets, has signed up to rent the 12,000-square-foot space.

According to Insignia's Foster, it's unlikely that Trinity's rents will approach the $50-per-square-foot level again. "I've been down there for 17 years, and Hudson Square was never a $45 market," he said. "It was a flash in the pan. I don't think we'll see those kinds of prices for a long, long time, if ever again."