TF Cornerstone’s Jake Elghanayan Talks Playing the Long Game in CRE
That includes office
By Mark Hallum January 21, 2025 2:00 pm
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Jake Elghanayan, principal at TF Cornerstone, has made it his business to advance the family business, which has been established brick by brick since it was founded in the 1970s by brothers Tom, Fred and Henry Elghanayan as Rockrose. Tom is Jake’s father.
Much of the development firm’s success, especially in multifamily, seems to be buttressed by a transgenerational wisdom. It allows TF Cornerstone (which spun off in the 2000s with Henry retaining Rockrose) to confront cycles of distress with the forethought to prepare for a multitude of hypotheticals, rather than great consternation that can end in losing properties to lenders.
TF Cornerstone remains enthusiastic about the outer boroughs. This is especially the case in Long Island City, the Queens neighborhood where the company has already developed multifamily buildings such as 55-01 Second Street, 4540 Center Boulevard and 4545 Center Boulevard, and has been working on 2-20 Malt Drive. It’s also planning apartments at 43-57 West Street and 2-24 Oak Street in Greenpoint, Brooklyn, the sites for which it purchased in August 2024 for $175 million.
Work continues in Manhattan, too, on Project Commodore at 175 Park Avenue, an 85-story supertall skyscraper with planned connections to Grand Central Terminal that has been in the works since at least 2016.
Elghanayan sat down with Commercial Observer last week to talk about his own wanderings before his return to real estate, some of the things that have kept the company going though the hard times, the government programs benefiting them, and the markets TF Cornerstone is expanding into.
This interview has been edited for clarity and length.
Commercial Observer: What was your journey getting into commercial real estate?
Jake Elghanayan: My dad [Tom Elghanayan] is one of our founders. He was always pretty good about not pushing me, but letting me know that there was a door open if I wanted to come. So my first job out of college was actually in foreign policy. I moved to D.C. and I worked at a think tank for like a year or so. Then, I actually got a master’s degree in economics and international relations. I ended up spending a summer in Tajikistan, and I was like, “You know what? I don’t know if I’m going to meet a spouse moving around all the time,” and I decided to go to law school. I applied to law school, and I got into NYU.
But our business was going through a transition [in 2009]. You were going through this division process — then we were called Rockrose and my uncle [Henry Elghanayan] wanted to split off. So my dad said, “Listen, why don’t you come work for me, I think you’ll find it interesting.” I sort of caught the bug then. I still went to law school and practiced at a firm for a couple years, but by then I knew I was likely to come back.
How have those experiences influenced what you do now?
I think it definitely gives me a little bit more of, like, a macro view. It definitely gave me a different perspective than most people who come into the real estate industry about how interest rates work and things like that.
Tajikistan was one of those things where you learn a lot by being in a strange environment. It’s a remote place. I was studying Middle East policy, and this was the period of time after Sept. 11. But it was much more of a post-Soviet state than it was an Islamic state at the time. I was there studying Farsi and Tajik.
Let’s talk a little bit about the City of Yes. What does that mean for you, and how do you feel about it?
I think City of Yes is gonna be pretty great. I put it in three buckets when I think about it. One is, there’s a bunch of technical fixes. When you talk to architects and the people designing the building, they say this will make it so that buildings are more logical. Also, it’ll be easier to fit them within the zoning rights.
The second is probably all of the stuff the city did on the lower density zoning around New York. That’s not where our business is, but I think that over time it will basically produce more housing, which is an important thing for New York.
And then what touches us most is that on larger density sites the city aligned the zoning bonuses well with the new 485x program. That makes it so that on the margins, if we’ve got a site that could do condos or rentals, it makes you much more likely to do a mixed-income rental building rather than a full market building. An example for us, we have a site on West 22nd Street that could be a condo development. But, between 485x and City of Yes, I think now we’ll definitely be taking advantage of the new zoning for a slightly bigger building with an affordable set-aside, and it should be a successful job.
What about Long Island City? It seems like you’ve got a lot of overlap there with low density and some of your developments.
So we just delivered two towers, two buildings there, sort of at the southern tip of Long Island City, where Hunters Point South turns into Newtown Creek. We started leasing one a few months ago. We’ll start leasing the other in the next month or so.
We’ve done an extension of the Hunters Point South Park by three and a half acres. I think Long Island City has become a great place to raise a young family in a modern building in New York, but still have access to Manhattan, still have access to the outdoors, and it’s a very well-planned, 21st-century community.
What’s next for you guys in Long Island City?
We have another potential phase as we continue moving up Newtown Creek. We think there’s some manufacturing sites that are well positioned to become housing. For us, that’s next. There’s a lot that’s going on in the north around Anable Basin. The city is working on a rezoning there that I think makes a lot of sense.
Right now, there’s the waterfront community in Long Island City, and there’s the Court Square community, right? And I think if they rezoned it, 44th Drive could be a sort of a connector between these two denser communities, and then you’re gonna have some low-scale stuff in between.
How far along Newtown Creek are you planning to develop?
There’s another couple properties or so before you start hitting an industrial section, like a real industrial section — packaging and warehousing and that kind of stuff. Frankly, the zoning already touches up against them in a way that makes it harder for them to run their business with people on the streets and stuff like that. They can’t park trailers on the sidewalk as much as they used to.
What have your plans in Brooklyn entailed? In August, you bought 43-57 West Street and 2-23 Oak Street in Greenpoint.
We’ve been in Brooklyn for a while. The first building we built was 33 Bond Street, which was around 2017 or 2018, and then we added some Williamsburg properties, and then Pacific Park, the Dean Street buildings. It’s a great area, and might be one of the best areas on the Brooklyn waterfront. You’ve got this great residential community in Greenpoint, and then we’re sort of at the southern end of that, so you also have proximity to northern Williamsburg and a lot of the more nightlife and restaurant scene there.
Plus, with the planned Bushwick Inlet Park, I think it’s gonna be pretty special. We’ll deliver about 1,000 units across three buildings there.
You sealed a new partnership with Dune Real Estate Partners for office-to-residential conversions. Why?
It’s an interesting story. The founder of Dune, Dan Neidich, is a friend of my dad’s, and they’ve done one or two deals back when we used to do more partnership deals in the `90s. We had done a conversion with them at 45 Wall Street, and then Jeremy Shell, my brother-in-law, who works with us now, had worked with Dan after business school. So there’s a lot of connective tissue between our organizations.
Dan reached out — this was in 2023 — and said, “I think there’s going to be a lot of conversion opportunities coming out of the pandemic. We should talk again.” We’re usually pretty reticent to do partnerships because we basically want to invest our own money in the deals and we like being deep into them.
What we decided really made the conversion story different was, one, we’re really New York focused and we think the opportunity is national. Dune has great franchises and relationships across the country. Outside of New York, we will partner with local developers, and Dune has those relationships.
The second big piece was, I think, in conversions in general you see much more dispersion in the outcomes. Some are going to be great. Some are not going to be as good. Obviously, we’re only going to aim for the good ones. But there’s more uncertainty, both in terms of city and state policies that are constantly evolving, where you might get some unexpected uplift.
And, then there’s more construction variety. So I think that makes it so you’re better off doing a portfolio of deals than one or two single deals.
Then the last is, I think what’s common across conversions is being really creative with the interior space. That’s something that we have in our history. Really, a lot of it is my father Tom — doing these layouts of old loft buildings and figuring out how to make the most of the space, which is something we did a lot in the `80s and `90s. I think that’ll be a quality we can bring to this next wave.
A lot of people are saying that office-to-residential conversions aren’t widely viable. Do you agree?
Our general philosophy is — in New York, especially, but in all cities — people want space. A lot of people say, “Oh, deep floor plans? They’re horrible.” But, in our experience, if you can find good ways of giving people access to more space, they will want it. The per-square-foot rents might suffer somewhat, but, if you buy the building cheap enough, that’s an attractive living situation. Plus, there are the high ceilings, all the unique features that are in a lot of these commercial buildings that would have been purpose built.
It won’t be as sort of efficient in real estate lingo as a purpose-built one, but I still think that there’s an extra value there for the consumer.
Are you finding that these buildings are selling for enough of a discount to kind of make that happen?
I think so. We spent a lot of time on one in Philadelphia, where we owned the retail already in this great old building called the Wanamaker Building in Center City. We bought the portion that was leased to Macy’s. The rest of the building had been converted to offices in the early `90s. The loan went into default. It was a CMBS loan. They had a $125 million senior loan and a $25 million mezz loan. The occupancy of the office building had dropped like 30 percent, and the note came up for sale, went through an auction process, and we bought the senior note for $25 million.
That’s like from $150 million down to $25 million for roughly a million square feet above grade. So you’re owning the real estate for pretty cheap at that point, and you can afford to invest a lot in it and make it great. And that’s 15.5-foot ceilings — landmark, beautiful facade. It’s pretty special.
Tell me more about some of your other out-of-town interests.
We have a portfolio in D.C. of office buildings that have been challenged ever since the pandemic. I think as New Yorkers we probably take for granted sometimes how much we’ve returned to normal compared to cities with less densities where there’s more of a critical mass issue.
I’m a little bit hopeful that the federal government will come back in force to the office more, which I think will have a great effect. We can’t let Washington, D.C., our capital city, sort of deteriorate, and it’s got to be a more vibrant place than it’s been the last few years.
They were going to lose the hockey and the basketball teams, and then they were trying to get the football team. I think they’re getting close to making a deal on the football field. You need those entertainment uses in most cities. Cities go through cycles, and I think it’s incumbent on people who care about cities to try to keep that in mind.
What’s the state of 175 Park Avenue?
It feels like we’re in a pretty good position now. I think it’s the best location for an office building in New York. We’ve got a great design, a great team with SOM and RXR, and I think the trophy market in general has rebounded for a few years now. But there was enough of an uncertainty overhang from remote work that I think people had a harder time making the long-term, forward-looking commitments that you need to start a new building.
We’ve seen that that overhang about remote work has mostly gone. I don’t think people are uncertain about how much office occupancy they’ll have in the future, as much as they might have had in the last few years. Plus all the new space has been absorbed — everything that started pre-pandemic. So we’re pretty bullish that this is going to be a good year for 175 Park.
It’s been a long story in the making. We bought the Grand Central Terminal air rights back in 2016, and made a relatively quick deal when J.P. Morgan wanted air rights for their headquarters — we sold off about half right there. Hyatt had been our first call from the beginning; we thought that that was really a great place to land the air rights and to build a big tower to replace the hotel.
We went through a long zoning process that was actually pretty productive, led to improvements in the design in certain ways, and also created public benefits that’ll be within the building. Then we spent the next year basically drawing and working out the development plans in earnest so that the building was ready to go. We really started our leasing efforts in earnest in the back half of `23. But it hadn’t been the best environment because people were saying, “Well, I don’t know. Do I need a million square feet or 500,000 square feet?” They didn’t know how to peg their future needs.
But I think now we’re seeing much more of that uncertainty falling away, and people want the newest, best, well-located space near mass transit.
What are discussions with office tenants like now, and are their expectations of concessions from landlords.
In the last quarter of `24, things changed fairly significantly where it seemed like, before, the activity had only been in the trophy quality space. It’s now bleeding through to the other well-located buildings in the right neighborhood.
And so like at 387 Park Avenue South, we had three floors come back from Silicon Valley Bank when they went bankrupt, and the first one went quickly, and then it felt like there wasn’t a lot of activity in the market. This was like a year and a half ago, right? Then, by this fall, there was just a tremendous amount of demand. New York feels like it’s sort of over the hump back to a more normal market.
I still think that the lopsided portion of the market is still somewhat true, where you’ve got a lot of less exciting buildings, not amenitized, not in the best location. There’s a haves and have-nots component where the better buildings do better and the worse buildings do worse. But I still think it’s going to continue to bleed through the next couple of years. New York City is probably ahead of the rest of the country in terms of an office recovery.
How are you guys dealing with inflation and interest rates? It seems as though TF Cornerstone has proceeded with construction despite those factors.
We’ve been some combination of lucky and good, which is to say that we’re a single balance sheet company. We don’t have that many partners, and we’re old school. We’re owner-builders. We try to buy things, build them and own them long term. It’s a conveyor belt in one direction, if that makes any sense, versus a lot of other firms that are more transactionally motivated. We’ve tended to refinance mortgages for 10 or 15 years, so there’s just less rollover in the portfolio.
More recently, we sort of just got lucky near the end of last year. We did $900 million of refinancings over three buildings and happened to lock in interest rates at their low point. I think our average rate is, like, in the high 4’s. That’s just lucky, and now we have no office loans maturing until 2028.
We feel pretty good about that on the rate side. We look at things over a longer term, and we’re probably a little less tied to exactly what is the build-to-cap rate relative to 10-year Treasurys at this moment in time. We’re probably willing to take a more normalized view of the long term.
I still don’t understand how my parent’s generation did it back when interest rates were like 14 percent. How did anything make sense? Somehow it worked, but that’s our attitude: We like to be consistent through markets.
