Charles H. Berg, vice-president of C.E. Finck Indexing Corp. in New York City, was fit to be tied, and who could blame him? A 100% rent increase in two and a half years was more than almost any small business could swallow.

But it wasn't just the rent hike that bothered the 34-year-old vice-president. Berg's landlord also intended to trim the length of the small company's next lease from 10 years to 3. "A business like mine can't operate with a 3-year lease," explains Berg. Finck is a $1.5-million-a-year manufacturer of printed loose-leaf tab dividers. "We need the security of a longterm rental agreement because it's so expensive to move a printing company. The average cost can run as much as $100,000."

Berg's solution? He decided Finck should buy space in a building rather than rent it. But that didn't mean he was ready to tell his landlord to take a hike -- at least not yet. Buying space in Manhattan, he learned, was no easy trick. But he did discover the trick.

What Finck needed, Berg concluded, was a structure that could support the weight of the company's heavy printing machinery. Also, the building had to have 20,000 square feet of space all on one floor or, at most, divided between two floors. "It was more space than we really needed," he explains, "but we wanted room to grow."

With a real estate agent in tow, Berg scoured lower Manhattan for the right building. That is when he hit the proverbial brick wall. "All the buildings I saw that met our requirements were priced in the millions of dollars," Berg remembers, "and they had 10 to 12 stories, which made them unaffordable to us."

Then Berg had his brainstorm. Why not take the concept of co-op housing one step further? Why not try industrial co-op space?

Berg took his idea to Caryl Stephens-Daye, a project manager for the New York City Industrial Development Agency (IDA). The group, which has a counterpart in each state, helps small companies purchase equipment and property by issuing tax-exempt bonds. In most cases, the bonds are purchased by banks, financial institutions, or the seller of the property.

"The IDA had never done a co-op or condominum," Berg says, but that fact didn't deter the organization. "It was a very sexy project," Stephens-Daye recalls. "Everyone here was in favor of it."

So Berg once again dialed his real estate agent. "We're in business," he told the agent, and they again set out to find a building that would meet Finck's needs.

The fifteenth structure they looked at was located at 121 Varick St. in the Hudson-West section of lower Manhattan. "It was ideal," Berg says."It was in a great location. It had interior loading facilities. There were 10,000 square feet on each floor. Everything was right, but it was a lot of money."

Berg needed partners, and the first place to find them, he figured, was at 121 Varick St. "I approached people in the building who were presently tenants to see if they wanted to join me in the purchase of the building," he recalls. "Then I called a few people I knew outside the building who were interested in buying floors."

With six partners lined up (three of them tenants at 121 Varick St., three of them small companies looking to buy space of their own), Berg returned to the IDA. There, the deal was mapped out. To cover the mortgage on the $3.7-million building, the IDA would issue 15-year, self-liquidating bonds. The annualized interest rate would equal 9.5%. The partners, in turn, would make a 10% down payment.

"We arranged for the seller to take the bonds," Berg explains, "so there was really no money transferred. He gets one mortgage payment from the co-op association, which is tax-exempt."

For Finck, the deal, which was finalized late last year, means shelling out about $130,000 a year for 20,000 square feet of space, compared to the $88,000 it was paying for its previous 11,000 square feet of rental space. What's more, the company has acquired an asset for its balance sheet, and, as Berg points out, "there's nothing wrong with that. I've often read about companies where the real estate is now worth more than the business," he adds. "I just feel that owning real estate in Manhattan is a very good investment for us."