Office tower scores big as condo - real estate developer Edwin Cogan turns New York, New York office building into condominium

Real Estate Weekly, Dec 9, 1992 by Therese Fitzgerald

In today's bewildering office market, creativity and flexibility can make all the difference.

"If someone has $24 million in hand and they want us to draw lines on a piece of paper that's called conversion, why wouldn't we do it," quipped Edwin "Eddie" Cogan, the man credited with rescuing The Hammerson Group's 420 Fifth Avenue from the verge of a drastic writedown and leading it to more than 60 percent rented or purchased.

Completed in the spring of 1991, 420 Fifth Avenue, a 600,000-square-foot office tower between 37th and 38th Streets, was the first New York development for British-based Hammerson, which has properties in Canada and numerous locations in Europe and Australia. Frustrated because, in a flooded office market, they had only attracted Turner Broadcasting for 60,000 square feet by the time the building opened, Hammerson's leader Sydney Mason was prepared to sell the building. When completed the office tower cost Hammerson $210 million, but it appeared that the market would only bear a "soft" $60 million.

"They had an offer that the brokers told them was the best offer they could get," said the slim and plain-talking Cogan, 58, who was called in at that critical point.

A developer and entrepreneur from Toronto, Cogan had been an advisor to Hammerson on various sales and purchases in Canada. He came to New York and began reviewing prospective users. He found that for two years the Girl Scouts of America had been tirelessly searching for a new headquarters, and, because as a non-profit owner they would be exempt from property taxes, he knew they were in the buying mode. And, he was also aware that, while they had considered relocating to other U.S. cities, their preference was to remain in The Big Apple.

"It was very important for them to have, they say, "the character of the country," said Cogan.

Cogan decided 420 Fifth Avenue could accommodate the Girl Scouts if it became a condominium. Pleased with the building and the conversion idea, The Girl Scouts, represented by Diane Wilson and Mike Meyers, then of Wilrock, agreed to take 170,000 square feet for a price of $24 million or roughly $140 a square foot. The city and the Attorney General's office facilitated the conversion process. What could have taken two years, Cogan said, happened in two weeks.

Then, as luck would have it, Turner purchased Hanna Barbera and decided to double its space in the building. The building's first 60,000-square-foot tenant would now occupy 120,000 or four contiguous floors.

"All things were evolving and luck is an important factor," said Cogan. "... Everything was expanding in their world when the rest of America was shrinking."

Next came the China External Trade Development Corporation of Taiwan, which purchased the penthouse floor for roughly $350 per square foot. This office is intended to help the Taiwanese find markets for their products in the United States and to encourage American investment in Taiwan.

Then, oddly enough, Guangdong Jianlibao Group,Ltd.,a Mainland China conglomerate that bottles the popular "Jianlibao" soft drink as its core business, bought the entire 26th floor of the building, consisting of 15,350 square feet.

The most recent purchase is for 20,000 square feet, most of the eighth floor, by Containership Agency, Inc., an Italy-based conglomerate involved in shipping and other industries. According to Cogan, they achieved about the same price range in this deal as they did in the others.

Totes Umbrella has also leased some 9,000 square feet of space in the building.

Though he could not yet divulge names as the deals are not yet official, Cogan said he has enough lease and purchase deals pending to fill up the building. He said they are also on the short list for a number of non-profits looking to purchase space. "This building for all intents and purposes is over sold," Cogan said.

At 420 Fifth Avenue, Cogan estimates, the leases and the purchases in the building thus far have doubled the value of the building from $60 million to $120 million.

"There is a market and you can make a profit in a distressed market," he said.

Cogan acknowledges that 420 Fifth Avenue as a condominium has particular appeal for foreign companies. While American requirements represent a "mixed-bag", he said, Europeans are accustomed to office condominiums, and "the Asians they just believe in ownership. "And, he said, there is always the attraction of Fifth Avenue.

"Everybody here had an option to lease," he said. "We didn't force them into owning."

Management Pledge

Hammerson, Cogan said, has a contractual agreement with both the Girl Scouts and Turner Broadcasting to manage the building for at least five years. They can, therefore, he said, protect the building from speculators and ensure a healthy mix of occupants.

"The whole idea was to make the building a neighborhood and to protect the neighborhood," said Cogan.

The building's three floors of retail, Cogan said, will be "an integrated retail concept" tied into the neighborhood they are aiming to create. The components, he said, may include a fitness center, licensed products, and other leisure facilities. Cogan said they have many proposals and they plan to close on tenants by February.