Jotham Sederstrom Feb. 7, 2012, 9 a.m.
With three dozen projects underway in Long Island City, the brothers behind Rockrose Development—two of whom split to form TF Cornerstone in 2009—are poised to compete against one another for prize renters and retailers in what is rapidly becoming Queens’s answer to Williamsburg and Dumbo. TF Cornerstone chairman Thomas Elghanayan spoke to The Commercial Observer about the EastCoast, his firm’s waterfront rental complex, the infamous Rockrose Development coin toss, and his tense relationship with brother Henry Elghanayan, chief executive of Rockrose Development.
The Commercial Observer: TF Cornerstone is developing what it calls the EastCoast, three luxury rental buildings along Center Boulevard near the waterfront. That’s in addition to the View, another rental complex. Why so confident in Long Island City?
Mr. Elghanayan: We’ve been working on this for quite some time. We have a bunch of buildings there. They’ve all rented well, and as we build more buildings, that location becomes a better-known destination. When people look at the rental possibilities, now they consider Long Island City one of those possibilities. That, actually, is why we’re rushing on all these buildings—because we believe in the sort of critical mass of building the neighborhood and attracting tenants. It’s four minutes on the 7 train to Grand Central.
Besides the TF Cornerstone development projects under way, Rockrose is also building in the area. What else is happening in Long Island City besides what the three Elghanayan brothers are pursuing?
Quite a few buildings. There’s 35 other residential construction projects as you go east from our waterfront, which is sort of the prime area in Long Island City, where the high-rise buildings are quite large. We’re also putting in a park that’s almost finished now, and there’s a school that started construction—K-8—that’s adjacent to one of our buildings. And there’s also a library going in now too. And we have planned a lot of retail in our buildings as, really, a convenience for the neighborhood. We’re putting in a coffee shop called Sweet Leaf. The New York Times said it had the best espresso in the United States. But we consider this a great amenity for the area because we’d be happy to have a Starbucks, of course, but this is better than a Starbucks because it sort of fits into the image of Long Island City—not chain store but more boutique, Williamsburg-like shops.
Do you feel like TF Cornerstone is playing a role in carving out a specific niche for the neighborhood, like the Walentas family has done in Dumbo?
Yes, we’ve been consciously working on it. Just look at the kind of retail we’ve put in there. We put in the coffee shop. We put in Shi, a very good Asian fusion restaurant. And we have a spinning outfit there called rotations. So it’s all community-based services.
How will these projects differ from those being planned by Rockrose Development—the development company you and your brother Frederick separated from in late 2009?
I’d say, concept-wise, they’re all high-end luxury projects. If they were on the Manhattan side, the rent would be 25 percent more—in our case, at least. I don’t know what the rent differential is with Henry’s buildings, which are farther inland. We view being on the waterfront, and being directly on the waterfront next to the park, as the equivalent of sort of Fifth Avenue in New York City. This is really the prime Long Island City—or actually the prime Queens—or actually really, really, the prime outer-borough location.
Considering what’s at stake in Long Island City—dozens of construction projects and the chance for each developer to create the neighborhood in his own image—how often does TF Cornerstone interface with other builders in the area, be it small firms or Rockrose?
I don’t really talk to any of the other developers. I’m glad there are these developments going on. I encourage it because I believe in the neighborhood building aspects of this—the critical mass. So I’m glad Henry is building his buildings, and I’m glad these other buildings are being made, too. But ours is the real luxury property out there.
Expedience is always important, but with so many developers rushing to complete construction in Long Island City, is there pressure to go online before the others?
No, no. That’s not my thinking. What’s happened is that the rental market in New York City now is very strong, and part of the reason for that is that the sales market is very depressed and the job market in New York City—as opposed to the rest of the country—is still pretty strong. And there’s been very little new production of luxury rental housing, so it felt right. We’ve owned the land for a long time. We’ve completed the remediation, so we get no income out of the land, yet it’s just sitting there. So we decided to build the project as quickly as possible and bring our product to market. So we’re phasing it out over time but building quickly.
How has TF Cornerstone—and you and Frederick—fared since the split from Rockrose?
Well, from our point of view it’s sort of energized Fred and I, in our end of the company. We’ve actually been very, very active since the division. We’ve taken over the projects we had under construction because we ended up with about 90 percent of the construction staff—because all those people had always worked for Fred, because Fred always ran the construction company. So we ended up with all the projects we had under construction, and we’ve finished them. We’ve finished 1,418 apartments in four buildings, and we rented them out and financed them.
We’ve also been active on the acquisition side. We’ve bought two office buildings in D.C. and we’ve also either acquired or are now negotiating to acquire land in Manhattan where we can build approximately a million square feet. With that, I can tell you it’s on the West Side, in Chelsea and in Hell’s Kitchen—mixed-use, but no condos.
And we’ve done a tremendous amount of financing, too. We’ve completely refinanced our entire portfolio because the interest rates are so low. We’ve done $1.1 billion in refinancings. We never had any mezz debt and things like that; it’s all first-mortgage stuff, and we’ve done $450 million in construction loans so we’ve been very busy.
How would you characterize your relationship with your brother Henry?
The whole division was upsetting. On a business level I think we did it very cleanly and amicably, but we were partners—and we’re still brothers forever—and it happened at a very difficult time in all of our lives, meaning my father was very, very ill, critically ill, and my mother was also not feeling well. In fact, my mother ended up dying during the middle of the whole thing, so emotionally it was difficult. But the division was very difficult—it was emotionally very difficult.
On a business level, has it been difficult without the benefit of Henry’s expertise?
Fred and I work well together. I don’t know if it’s a function of our personalities or a function of the numbers, but it’s been easier to run a business with two people than with three.
The coin toss, which determined how Rockrose’s portfolio would be divided into thirds, has taken on mythological status, but I understand that neither you nor Fred was present at the law firm when it all happened. Why not?
Fred and I did not attend, and we’re quite upset about having the coin toss when it took place because it was actually the day after our mother died and we were sitting shiva so there was no reason to do it then. It all happened at a lawyer’s office, and I think it was just [Henry’s son] Justin and Henry. We had a lawyer representing us, but we weren’t going to attend. And, actually, a day after the coin toss, my father, who was very ill, died.
Why didn’t you just postpone the coin toss?
Henry insisted. We had a tight time schedule on the division, and so the schedule called for the coin toss to happen on that day—I think it was March 5—but on March 4 my mother died. So we said, ‘Look, we’re sitting shiva. We’ll delay this thing for a week. It’s not a big deal anyway.’ But Henry was insistent on going ahead with it.
Why so insistent?
I’ll tell you, I’m still scratching my head about it. There were a lot of financial things floating around in the division and a lot of decisions to be made, and we made those on a pretty friendly basis. But a thing like this, Fred and I are still scratching our heads.
Did Henry ever sit shiva?
He did, but part of sitting shiva is not doing business.
It sounds like there’s still some tension.
Yeah, well, there’s no business tension because we don’t have any business dealings. It’s just that the manner that it was done, I think, has left some bad feelings.
Do you get together for dinners?
We get together for family events and things like that, and I imagine over time things will improve and everything will go back to normal, because we were a very close family.