In 2009, the brothers behind the Rockrose Development Corporation—Henry, Thomas and Frederick Elghanayan—divided their four-decade business partnership in half, with Frederick and Thomas spinning off to form TF Cornerstone, and Henry staying put at Rockrose with his son, Justin Elghanayan, 33. Since that relatively amicable split, in which the company’s $3 billion empire was divided in half, Henry Elghanayan has rebuilt the portfolio and elevated his son, who has taken the reins as the project manager of Linc LIC, a development in Long Island City, Queens, scheduled to include two residential towers and a retail complex that, when finished in 2013, could breathe new life into the long-simmering neighborhood. Last week, Justin Elghanayan spoke to The Commercial Observer about his family’s recent split, the future of Rockrose and his Long Island City project, which includes what could be the tallest building in Queens.
The Commercial Observer: What’s the latest with Linc LIC, the 41-story rental tower that Rockrose Development Corporation is building in Long Island City?
Mr. Elghanayan: The first phase is under construction. We started in September, and that’s a 709-unit building that’s now on the 12th floor, and it’s quite amazing how fast it’s going up. I went away for the holiday and I came back and there were, like, three more floors, so it’s really zipping along.
Besides Linc LIC, Rockrose is developing two other parcels at the site. What’s the plan?
The second parcel is a big parcel of land that will have an additional 900 apartments that will go in two phases. And the third parcel of land is right in the middle, and we call it the Triangle. That’s going to go last, and it already has on that lot a garage, which, when I saw it, I just said, “Wow, this has an amazing sense of character and place, a real sense of history and character and a sort of neighborhood identity.”
When you say garage I don’t immediately think character.
It’s not like a parking garage. It’s more like a mechanic’s facility. It has wood-beam ceilings, skylights and high ceilings. And we’re going to put a restaurant there.
Have you found a tenant?
We’re pretty close. It’s going to be very exciting what we do there, and that’s just the existing building. That restaurant’s going to have outdoor space and so you’ll have a sort of beer-garden vibe and atmosphere there, and then we’re going to supplement that with additional activity on that site, which is under development. We’ve already been putting food trucks on the site. We inaugurated the Rockrose Food Truck lot on the Triangle site.
Are there neighborhoods, like Dumbo or Williamsburg, that you’ve been inspired by?
We are creating a neighborhood, but I think the key to me at least is that there’s already this core kernel of spirit in the neighborhood because it has a truly deep artistic and cultural past with PS1 and the SculptureCenter. There’s tons of cultural institutions so it has this sort of gritty, existing artistic vibe, which I think is essential to creating a great neighborhood. So it’s not just like we’re going out into the middle of the desert and saying, you know, ‘We shall proclaim this a cool neighborhood.’ It has this sort of incipient potential, and we just want to draw it out.
In the brief time it was open, M. Wells gained attention in Long Island City and the culinary world. Have you spoken to the M. Wells people about leasing the garage?
We have spoken to them, and I don’t want to speak too much about the leasing of the garage, for now, because it’s not public information yet. But we’ve spoken to several groups, and M. Wells is one of the groups we’ve spoken to.
Rockrose Development has traditionally taken a conservative approach to financing and, in many cases, avoided risky instruments like mezzanine loans. With Linc LIC are you continuing that tradition or have you found new ways to fund the project?
It’s in the same tradition. It’s a $155 million loan, which is consistent on a LTV basis to what we generally do. We’re putting in a massive amount of our own equity with no partners. Our total equity in the deal will be over $100 million so we’re very confident in the neighborhood, as evidenced by our equity contribution. In terms of getting financing, it’s a consortium of three banks: Wells Fargo, Bank of America and Helaba. I’m not the first one to say this, but the well-established family developers are able to get financing right now and a lot of smaller developers are not, and that’s containing the supply. As a result, we’re seeing healthy rent growth in our portfolio.
How has Rockrose fared since 2009, when Henry’s brothers—and your uncles—divided the company and formed TF Cornerstone?
It’s been fantastic. We’ve gotten this project going, which is exciting. And in tough economic times, it’s great to get this kind of project happening.
Unlike other family-owned real estate companies that have splintered, the Rockrose division has been relatively amicable. What do you attribute that to?
It’s not surprising and it makes complete sense. First of all, we had an enormous advantage, which is that Henry, Tom and Fred were very smart about creating a good contract for the partnership. They had a mechanized methodology in place for how to divide the company so there was little room for conflict because everything was laid out, down to the day. It was a fair system so everyone got a fair share.
Leading up to the split, your father and his brothers holed up in a conference room in early 2009 and flipped a coin to determine how best to divide a $3 billion real estate empire comprising 8,000 apartments, nine development sites and nine office buildings in New York and Washington, D.C. Were you in the room during that coin toss?
I was. I remember it. It was a pretty dramatic time, just to have things sort of hinge on a coin toss. But it’s been somewhat overdramatized because the truth is it was really a win-win. It was heads you get this amazing thing, tails you get that amazing thing, because you were going to get something good in any event.
As a result of the split, Thomas and Frederick won a portion of the portfolio, including six office buildings in Washington. Has Rockrose attempted to rebuild what it lost?
We have. What we’ve done is re-established the portfolio in D.C. with a two-building acquisition—one we closed on, 1150 18th Street NW, and one we’re in contract with, 1776 I Street NW. And we’re looking to acquire more, and we have a great team and so we’re poised to do bigger and more exciting things going forward.
Does your family still have roots to Rockrose Place, the street in Forest Hills where your grandfather, Nourallah, settled after emigrating from Iran in the 1950s?
Well, actually, it’s interesting you asked that. My grandparents lived there until they passed away two years ago, and their house was recently sold so I would say the answer is no, no more, because the house was just sold.
As the only offspring working at Rockrose—your cousins are now at TF Cornerstone—is there pressure to keep the company’s legacy alive and successful?
In terms of extending the Rockrose name, I do have big shoes to fill, but my father’s a great leader and a great chief executive, and I learn from him all the time and every day, and I’m actually very proud to be working with him.
Do you call him Dad or Mr. Elghanayan?
I never call him Mr. Elghanayan. I call him dad in a personal context and I often call him Henry—I call him by his first name—in a business context. But we’ve been very careful about separating the two things. When we’re at family functions at home, like if we’re at dinner with my mother and my brothers, then I’ll say, ‘Okay, dad, no business talk. We’re not going to talk about business for the next two hours.’ And I’ll be religious about it. And then later we’ll be having coffee or something and one of us will peek over and start bringing something up and we have to stop ourselves.