The Quiet One From the Construction Side
In a breakup that reverberated across the real estate press, the brothers behind the Rockrose Development Corporation–Henry, Thomas and Frederick Elghanayan–divided their interests and spread their wings last year. While Henry continued on under the Rockrose name, Thomas and Frederick spun off to create TF Cornerstone last September. Frederick Elghanayan, 62, sat down to talk about the firm’s first year, the Rockrose split and his construction schedule.
The Commercial Observer: Happy belated one-year anniversary! What, may I ask, have you accomplished over the last 14 months over at TF Cornerstone?
Mr. Elghanayan: We just closed on an office building in Washington, D.C., at 2121 K Street. It’s a Class A office building, and we bought it from ING Bank. We’re happy about it. It was strange, but the lawyer representing ING was one of the guys representing us in our division. So he had to sort of disqualify himself. But it went very well.
And how about here in New York? What’s new, development-wise?
Well, we broke ground about three months ago on our next building. We call it East Coast Number Four. It’s a 41-story apartment building. We’re going to finish the foundation in the next two weeks, and then the crane is coming and we’ll have about 380 apartments. That’s in Long Island City.
And then, last week, we gave out orders for the foundation for the building after that–we call it East Coast Number One. We’ll start that building in about two weeks. We just have to get our pile-driving permit and we’ll be ready to go. So we actually have our hands very full right now.
In this climate, how are you getting financing approved for construction projects?
I don’t know, but it’s happened. We’ve done a lot of financing, even though people say it’s impossible to get financing. But we didn’t find it to be that difficult.
Why do you think it’s gone so smoothly for TF Cornerstone and not your competitors?
People said it was impossible to get construction financing, but we’ve had a lot of interest in banks giving us construction money. I think it’s because we’re reliable people who are very hands-on. We do our own construction and we do our own management so we have very good control over the project. I don’t know. … Maybe there are one or two other developers who actually do their own construction. I think banks have money, but they’re careful about who they lend it to. We’ve been in business for 40 years, and we’re developers and we know exactly what we’re doing.
Before the recession, you and your brothers always resisted mezzanine financing, even at the height of the boom. Now that it’s become a dirty word, do you feel vindicated?
No. I could never see borrowing money at these crazy mezzanine rates. We’re actually a well-financed company, and that’s why we’ve had very few partners in our lives. We always use our own money, and we don’t want to do 10 jobs at a time. We do one or two at a time and we’re happy with that.
You and your brothers have always had a knack for spotting emerging neighborhoods. Are there any neighborhoods you’re looking at now?
The area we’re working in right now, which is emerging, is the Hudson Yards area. We were the first ones to do a large-scale project there, at 455 West 37th Street. And right next door we got, like, almost half a square block, and we built 835 apartments; and it’s still an emerging area. There are several projects that were started in the area that stopped. But we continued building ours, and we’ve leased them up.
When you and your brother Thomas broke off from Rockrose, you flipped a coin to decide how your assets would be divided. If you had won that toss, which you did not, would anything be significantly different for TF Cornerstone right now?
No. I think from the personnel point of view, Tom and I were the development team. So I think all of the development people would have come to us even if we didn’t have the development properties. The only thing that could have been different, and I don’t know if it would’ve been, is that all of the office buildings were basically in one pile. Henry won the coin toss and he did not pick that pile. If he had picked that pile, we wouldn’t have had any office buildings. So that may have made a difference.
Do you think Henry was showing mercy?
You’d have to ask him.
Charles Bagli of The New York Times described you in an article last year as ‘the quiet one’ of your four brothers. Do you agree with that assessment?
I actually joked with him later on about that. I sent him an email, and on the subject line I wrote, ‘It’s from the quiet one.’ And we have a little joke now. He calls me the quiet one. Tom is probably more vocal than me, so in comparison I am the quiet one.
So you’re the George Harrison of the group?
Right. Originally, they kept me in the closet because I was the construction person. Construction was always sort of a dirty, nasty business. But the way I got into the construction business is that when I first started, in 1970, we had hired a general contractor to do a brownstone renovation over on 140 West 74th Street. We were combining three brownstones into one building. The contractor went bust. My brothers and I got together and they said, ‘Look, Fred, you went to engineering school. You must know how to build buildings. You do it.’
So I rolled up my sleeves even though I really knew nothing about construction and I continued using the personnel that were working on the job–the laborers, the masons–and we did all the trades ourselves–everything except the plumbing, electrical and roofing. But we did cement, we did all the carpentry, we laid bricks. And that’s how I learned the construction business.
I was doing exclusively construction since 1970 until the breakup. After the breakup, when we got the office buildings–we have now 11 buildings–I took over the office leasing and retail leasing departments, and I’ve been jumping into that. It’s been preventing me from going into the field as much as I used to go. I’m much more busy, but I miss construction. To me, that’s my passion.