Walgreens has reached a deal to lease the space for about $2 million in annual rent according to sources with knowledge of the transaction. The drug store giant will either operate its own store in the location or use the space for a Duane Reade, the New York City based pharmacy that the company purchased last year for $1.1 billion.

The space, which is about 22,000 square feet in size, formerly was home to a Borders bookstore but sat vacant after the company declared banruptcy at the start of the year and in July subsequently opted to liquidate its national portfolio of about 400 stores, including nine locations in the city according to reports.

The real estate investment company Madison Capital acquired 100 Broadway in 2010 after buying debt on the property and foreclosing on the roughly 375,000 square foot building’s prior owner, the Japanese real estate firm Hiro Realty. Madison Capital used the technique to move in on another Hiro asset as well according to written reports, 655 Fifth Avenue.

The firm installed a team from the real estate services firm CBRE to handle leasing the building’s office space. It selected a group from the rival firm Cushman & Wakefield to lease the retail space.

Though the deal with Walgreens will fill a prominent vacancy at 100 Broadway, in some retail circles, the deal may come as a bit of a letdown. Some leasing experts and neighborhood advocates had hoped the space would attract a tenant that would add to the neighborhood’s rise as a shopping district with destination retail. Though drug stores fill a large niche in the city for food and snacks on the go, prescription drugs and as a convenient stop for other odds and ends, most retail experts concede that the use is generally an un-sexy addition to the streetscape.

Jeff Winick, chief executive of the retail brokerage Winick Realty, handles leasing for Duane Reade. Mr. Winick could not be reached for comment. Executives as Madison Capital also could not be reached.

Writes The Real Deal's Adam Pincus:

The brokers, who are not charged in the case, acted on a few deals with Duane Reade as both landlord and broker. In addition, the trial has painted a picture of a retail leasing environment in which landlords in a few instances paid brokers in cash to avoid taxes, including one instance of a suitcase filled with cash, though such cash dealings didn't occur in connection with the Duane Reade deals.

Defense attorney Reid Weingarten, representing one of the two Duane Reade executives accused of orchestrating sham real estate deals with affiliates of Winick Realty Group, said that while the deals were not bogus arrangements, they were pieces in a cloudy and interconnected world where payments flew back and forth between limited liability companies.

While there is nothing illegal about a property owner acting as broker on his own property, the situation could allow the individual to alter a commission payment based on other financial circumstances. How such commission and other payments are made are central to the allegations against the Duane Reade executives.

More here.

drubinstein@observer.com