Foreign governments look to buy.

Overwhelmed by new asking rents on their office renewals, foreign governments are once again turning to an old-fashioned method of controlling costs: they want to buy condominiums and office buildings.

But with Midtown traffic a growing gridlock, and quick trips backs to the office for secure phone lines a must, the diplomats have learned they can't be located too far away from the United Nations.

They are therefore wistfully letting go of their Upper East and West Side digs and increasingly turning to those buildings within a few blocks of the United Nations, but even there, options are few.

Historically, said broker Paul Massey, a partner with Massey Knakal Realty Services, foreign countries purchased townhouses in the East 70's because they were inexpensive. "As things got busier, they had a huge problem getting back and forth," he said, and have more recently been consistent sellers.

Egypt, for instance, has a townhouse at 36 East 67th Street, but earlier this year, purchased an office building at 304 East 44th Street from the American Federation of Musicians and Composers that has twice the square footage and didn't need much work done before they could move in.

"They bought a beautiful building, a prime property, with more usable space for the mission," said their broker, Marilyn Herskovitz of Douglas Elliman.

Egypt's 17,500 square-foot townhouse is now on the market through her with an asking price of $9 million. "And there's another government interested," she noted.

Gil Robinov, senior vice president of CB Richard Ellis, said the Egyptians, who also looked at his exclusive listing for condo spaces at 809 First Avenue, told him they wanted to be closer to the U.N. because of parking problems on the Upper East Side; personal safety if they must walk; and secured phone lines to obtain voting instructions from their government.

"Most of all," said Herskovitz, "they wanted to be close to the United Nations."

For the same reason, the country of Qatar purchased a 9,000 square-foot floor at 809 U.N. Plaza, across the street from the United Nations.

The Mexican Consulate purchased 37 East 39th Street in 1997 from Mettalurg, but didn't move in until renovations were completed this year. Now a ragtag line of families with strollers forms outside almost every morning.

It's the constant stream of visitors, tourists and countrymen seeking government documents, visas and information that caused the Trump Organization to put strict limitations on how much business will be allowed to be conducted in the residences at Trump World Tower, now rising near the United Nations.

Sources say residential use is obviously permitted, and residents will probably be allowed a personal secretary, for instance, but the elegant digs can't be used as the official offices with their attendant outside traffic and employees. Still, that hasn't stopped several countries from buying residences as high up as they can afford.

Jockeying rivals is sensitive business, says one broker who asked not to be identified, continuing "Some governments won't buy a floor under another government. It's a hierarchy fueled by how they want to be seen in the world, especially for neighboring countries, as to who gets to sit higher in the building," said Diana Gaines, a co-agent at 809 U.N. Plaza.

Countries now located on the Upper East Side include the Embassy of the Ivory Coast, which has a townhouse at 46 East 74th Street and an office at One World Trade Center, for instance.

Bulgaria has its mission at 11 East 84th Street and its Consulate General at 121 East 62nd Street. Pakistan's Missionis at 12 East 65th. Indonesia is located at Five East 68th Street; Iraq's Mission is at 14 East 79th Street; and Morocco owns 6 East 77th Street.

The French Consulate has an Annex at 10 East 74th Street and has several other closer offices to the U.N.

If they do sell their townhouses, countries still must replace the office space with something closer just, the same as those now finding themselves at the end of cheap leases.

For those that buy, however, the costs can be less. As a foreign country, owned buildings are exempt from New York City property taxes. Since this makes up $7 to $10 a foot of any city lease, it can be huge savings, says Robinov.

Oddly, the Department of Finance counts many countries as owing huge sums for property taxes, but these amounts are totally uncollectible and can be attributed to the diplomats not even bothering to go through with the paperwork to exempt their owned buildings.

It does, however, leave a paper trail of the savings a country can enjoy, simply by owning its property.

The Government of Turkey, the city's top delinquent taxpayer, technically owes a total of$38,093,006.48, including interest due as of October 27th, for its building at 821 First Avenue. The oldest amount dates back to March 1, 1991.

The Libyan Arab Republic is far behind, owing $25,586,289.16 on 309 East 48th Street, with open amounts dating back to July 1, 1980.

After two private buildings in Far Rock-away, Hungary tallies in at No. 5, owing the city $17,853,480.32 on 223 East 52nd Street, with the earliest amount due from March, 1991, when it constructed the building.

India comes next with $16, 254, 615.34 for 235 East 43rd Street.

Along with a huge amount of cash for selling their now prestigious and expensive townhouses, countries can relocate much closer to the U.N. in the West 30's and 40's.

"It's more than saving on the tax, it's permanence," advised Robinov.

While 633 Third Avenue is a few blocks away, the building was converted to office condominiums and its floors also have attracted the interest of foreign governments.

Saudi Arabia is located at 866 U.N. Plaza, but is actively in the market too, brokers say.

Insignia/ESG's David Hollander, director of leasing for 633 Third Avenue, says purchasing provides a tremendous cost savings for the governments.

While condo office space sells in that area for $400 to $475 a foot, rents are in the mid 50's to mid-$60's and climbing. "There is no more $40s," Robinov said.

"We have talked to, and there has been strong interest from a dozen different governments, and they continue to have interest, it's just a very slow decision-making process," Hollander said.

Typically, no one person can make a decision, and along with numerous phone calls to the home country, there is also frequent travel back and forth by the officials.

It took the Japanese a year to buy a building, and other governments move just as slowly.

"With governments, you have to have patience, agreed Herskovitz.

Of 10 floors on the market at 633 Third Avenue, Hollander's team has sold three two to a non-profit which also enjoys exemption from property taxes - and is in a contract for a fourth.

"We have a lease out for one of them, because we've decided that if the governments don't step up and make a deal, we will lease to credit-worthy tenants," he said. If the government's don't have leases expiring, "they are not necessarily motivated to move," he added.

It's coming to the end of low-rent leases that is prompting some of the countries' current searches, amid the high prices being garnered for Upper East Side townhomes that are causing them to take another look for what the money could buy closer to the United Nations.

But some countries are so small, just a few hundred square feet will do. Others prefer to rent.

Several Middle Eastern countries are said to be negotiating for full floors at 305 East 47th Street, which is a rental being handled by Williams. The Chilean Mission already has two floors in that building.

The governments also have access to cheap and lump sum cash, however, amid both Hollander and Robinov explained it's easier for the governments to get cash for a one-time purchase than to justify an ongoing high lease number.

"The leases that are expiring have rents that are 10 to 15 years old," explained Robinov. "The owners are increasing the renewals from 50 to 100 percent." The expiring leases are in the $30 range, amid they are now being asked to pay $40 and $50 a foot.

"These tenants are doing the analysis, amid not only do they save on taxes, but the money is reasonable, because they have it in the bank or they can borrow at LIBOR," added Robinov. "Why rent when they can own, when it's less than it costs to run, and they have an asset at the end of the day."