TF Cornerstone To Convert Billionaires' Row Office Tower To Residential

TF Cornerstone has closed on the acquisition of Tower 57, a Billionaires' Row office tower it plans to turn into mixed-income housing — the first Manhattan office conversion by the firm in more than two decades.

TF Cornerstone, led by Tom and Fred Elghanayan, signed a ground lease for the 32-story building at 135 E. 57th St. on Monday night, company principal Jeremy Shell told Bisnow Wednesday.

The firm plans to turn the roughly 430K SF building on the east side of Billionaires' Row into 350 mixed-income apartments by leveraging the state's new residential conversion tax incentive program, 467-m.

The land under the building is controlled by William Wallace, and the property was designed by Kohn Pedersen Fox and developed by Cohen Brothers Realty Corp. in the late 1990s.

Cohen stopped making ground rent and property tax payments on the building during the pandemic, and a New York Supreme Court judge in September granted Wallace's request to terminate the lease, citing the default. TF Cornerstone has been negotiating with Wallace for nearly a year to secure the building, Shell said. 

“The fee owner was saddled with a distressed asset, a lot of vacancy and in need of capital improvements,” Shell said in an interview. “Ground leases are complicated, especially for development. We negotiated a new ground lease. It was fairly quick and painless and amicable. There were lots of twists and turns in the transaction, which is why we’re here in August.”

Wallace was represented by a JLL team of Andrew Scandalios, David Giancola, Drew Isaacson and Jennifer Zelko.

Shell declined to say what the building's occupancy level is, writing in a follow-up email that Tower 57 “has very limited remaining office tenancy and we are working with those folks to vacate their space in the near term.”

The project wouldn't have been feasible without the City of Yes rezoning that passed last year, which allowed conversions of newer office buildings in Midtown to be turned into residential as of right. 

In order to benefit from the 467-m program, 25% of the building's units must, on average, be affordable for renters making less than 80% of the area median income. If the project starts construction by June 2026, it is eligible to receive a 90% tax abatement for 30 years and reduced taxes for another five. 

“We are under the gun to pull a permit as quickly as possible under the 467-m program by June 2026,” Shell said. “We have no time to waste.”

TF Cornerstone already engaged architects and engineers during the drawn-out negotiation process, so it has a general sense of what it wants to do, although Shell declined to disclose a cost estimate. 

The exterior of the building, with its curved facade tower over the corner of 57th and Lexington Avenue, will be largely untouched, with the exception of replacing all the windows. The building's 12.5-foot ceiling heights and smaller-than-typical floor plates mean it lends itself more easily to a conversion than many of the buildings constructed in the 1980s and '90s.

The developer also plans to work with the city to design a new public plaza to “create a sense of arrival” and make the corner more pedestrian-friendly, Shell said. A full floor of the building will be reserved for amenities like a golf simulator and pet spa to make it “a very luxurious building” while still providing affordable housing in one of Manhattan's wealthiest pockets.

“I don't know how many opportunities anyone is going to have to build affordable housing on Billionaires’ Row,” he said. “I think that’s important for our city.”

The rate of office-to-residential conversion projects has picked up dramatically in the city this year on the heels of City of Yes. RXR, SL Green and Apollo Global Management are turning 5 Times Square into more than 1,200 apartments, while Metro Loft Developers and David Werner Real Estate Investments landed $720M in May to convert the former Pfizer headquarters on 42nd Street into more than 1,600 apartments, the largest conversion project in the country.

TF Cornerstone has completed 15 adaptive reuse projects for more than 4,000 apartments but hasn't taken on an office conversion in Manhattan since 2000 because land values haven't justified it, Shell said. This will also be the firm's first Manhattan residential project of any kind since it delivered 606 W. 57th St. in 2018.

In Philadelphia, it is remaking the historic Wanamaker Building into 628 apartments. Along with Dune Real Estate Partners, TF Cornerstone launched a $1B office-to-residential conversion vehicle, Alta Residential, in December, but it purchased Tower 57 independently from Alta.

“That doesn’t preclude the Alta venture from coming in down the line,” Shell said. “Often a developer will take down a building, especially when they have the capital like we have and we’re able to execute, and if we want outside capital, we bring it in and structure it as the plans for the building evolve.”