Mall Master – Inside Dealmaker David Cordish’s Empire
WARFILEDS MARYLANDS BUSINESS MAGAZINE
THE MIDDLE MAN
David Cordish relishes his roles as Dealmaker, Savior of Lost Causes, and Mediator
David Cordish likes to be asked. Cordish, now a nationally prominent Baltimore- based developer, got into the strip mall business because someone asked him to take over a languishing project. He agreed to head a multi-million dollar federal agency-and put his business empire on hold for years-because a friend asked him to. He has helped mediate several local, highly visible development disputes because a succession of Baltimore mayors has asked him. He has taken on some of the toughest urban mall projects in the country because desperate city officials sought him out.
And Cordish likes being in the center of things. People keep asking Cordish to take on projects because, as a wheeling and dealing middle man, he makes things happen. As a developer, he matches retailers and lenders to his projects. As a bureaucrat, he funneled millions into deserving urban redevelopment projects. As a mediator, he balances competing views.
"In every [urban mall] project, we were sought out after someone else had failed," Cordish notes. "I sometimes think that’s a strange marketing approach. I have been reactive. Certain negatives have put me in far-flung areas. But it means you start knowing you are wanted and loved."
Cordish has sprinkled his malls all over the region and developed a national reputation as a rescuer of flopped retail centers. He rubs shoulders with the likes of mega developer Mel Simon. Yet he is not as well known in Baltimore as some other local developers, and he has yet to undertake a significant project in his home town. So why not?
"Nobody has ever asked me," he says matter-of-factly.
It’s more complex than that, of course, and Cordish, 51, is a complex man. He’s intensely competitive, ego driven, reportedly relentless in driving a deal, and constantly on the lookout for new challenges. He relishes the role of savior of failed projects. At the same time, he’s a conservative, control-obsessed developer-his strip malls are backed by straightforward loans and he still owns them all-and he’s demonstrated asocial conscience as a public official, a developer committed to public-private projects, and a quasi-public mediator.
"He knows the art of a deal," says John Luetkemeyer Jr., president of Continental Realty and an investor in Cordish’s earliest strip malls. "If it requires him to bluster, he blusters; if it requires him to listen, he listens; if it requires him to threaten, he threatens. He’s eminently rational."
BACK IN THE LATE 1960s, CORDISH PUT up $75,000-his life’s savings from six years as an attorney in his father’s law firm-to become a passive investor in a proposed strip mall in Edgewood.
But the original developer of the Harford County site was dragging his heels and the investors were getting fidgety. They turned to Cordish, who knew something about leases from his law practice, and asked him to take over the project.
"I was scared to death," Cordish says. "But I have a lot of confidence. Who better to save my own money than me?"
Cordish’s scramble to put a deal together brought him in contact with Israel Cohen, now CEO of Giant Food, who was then director of real estate for the grocery store chain. Cordish wanted a Giant to anchor. but insisted on putting a free-standing drugstore at the other end of the mall-although Cohen wanted to include a pharmacy in his grocery store. After sticking to his guns, Cordish recalls, "I started kicking myself and said, ‘David, you’re an idiot.’
But Cohen agreed to Cordish’s terms. Four months later, with contracts from his anchors and 15 smaller tenants, Cordish went to Equitable Trust with a handful of leases. "A shopping center should be done on the credits of the tenants. If it has to be done on your own credit, then don’t do it," Cordish says. He got his mortgage.
With the completion of Edgewater in the early l970s, Cordish was bitten by the development bug. "I fell in love with the process," he says. "There is nothing philosophically interesting about strip centers. You’ve seen one, you’ve seen them all. But it’s the process of getting them built."
It is a process that he has repeated over and over, and it has made him rich. Edgewater was a springboard for Cordish’s new development company, David Cordish & Associates. Within a seven-year period, he developed nine malls; today he has 16.
Cordish found a niche in forgotten parts of the state, outlying areas where strip malls could prosper.
"One thing about strips: You don’t have to be a genius in predicting trends," Cordish says. "Residential builders have to buy the gorgeous rolling hills. They blaze the trail and build up the area. I need people-lots of people. We come in last and pick up road frontage." Building the shopping center for the masses, he adds, is "a much safer economic bet."
"These were all economic deals," Cordish points out. "They were never sheltered or syndicated deals. We would project real cash returns. Once you establish a track record with banks and tenants, you really don’t need investors or syndicated partners. You can borrow from the lender."
"I don’t pledge one [mall] to another," he adds. "Each project stands on its own and if it won’t, I won’t build it."
Besides, he asks, "Why give it away? When I do it with a lender, I own it 100 percent." Cordish reasons that if he sells his malls, he’ll just have to find some way to invest the money, and nothing is quite as sound as keeping it in his own properties.
C0RDISH WAS ON A STRIP MALL ROLL throughout the early ’70s-until Robert Embry, a boyhood friend, came along with an offer that would shift Cordish’s direction dramatically. Embry, now director of the Abell Foundation, had gone to Washington to become assistant secretary for community planning and development at the Department of Housing and Urban Development. A new HUD program, Urban Development Action Grants (UDAG), needed a director.
"I had been looking around for somebody I could trust. There was a lot of money to be given out on a discretionary basis," Embry says. "I was just sitting there talking to him [Cordish] about it. I said, ‘That’s not something you would be interested in, is it?’ He said, ‘Maybe,’ and took it."
When Cordish arrived in Washington as director of the UDAG project, he found it "was a pretty amorphous idea. The whole law was written on one page."
But the needs were clear. The Northeast and Mid-Atlantic dowager cities were distressed, and private developers were hesitant to plow money into infertile grounds. "It’s hard to remember that time, but no one would build a hotel in Baltimore. It took a UDAG to build the Hyatt," Cordish says.
Cordish, with a free rein at interpreting the UDAG program, decided to alter the concept from grants to soft loans. "The developers would pay back the loans when they started to make a profit," he says. "Hundreds of millions of dollars are still being repaid to cities today."
A couple of thousand projects were started under Cordish’s tenure. "It was the hardest I ever worked in my life," he says.
Luetkemeyer remembers the reserves of energy that kept Cordish going. "He would get back to Baltimore half-beaten up at 6 p.m. and we’d be on the phone until 11 p.m. Conventional wisdom is that you can’t [run a company and a federal agency], but he’s got an unbelievable amount of energy."
In the meantime, Cordish’s orders to his staff were "no new projects. Just manage what I have built."
In 1980, when the Carter administration was ousted, Cordish came back to Baltimore to concentrate on his company. But by then his perspective had been altered.
"UDAG got me enamored with the political process. I loved cities," he says. "But I didn’t know how to translate that interest in the cities into the business side."
He learned in short order.
BY THE EARLY 1980s, THE TOWN OF NIAGARA Falls, New York, was staggered by industrial decline-unemployment reached 29 percent and the population dropped by two thirds. The city fathers put together an ambitious urban redevelopment plan for a mall called Rainbow Centre. But 18 developers shied away from the proposal until the city, in desperation, turned to the National Development Council, sort of a head-hunting firm that matches developers with projects.
"They knew I was a developer. They knew I had a public interest," says Cordish. "They knew there was a little softy here."
By this time, Embry, who had turned down an offer to work in then-Mayor William Donald Schaefer’s office, had joined Cordish’s firm. "We were invited in [to Niagara Falls] because no one else wanted it," Embry says.
"Bob and I saw an opportunity and thought we could make a buck and do this community a service it badly needed," Cordish recalls.
Cordish and Embry redesigned the $32 million, five-story mall. Two years after its 1982 opening, Rainbow Centre captured an Urban Land Institute Award. But the mall didn’t take off immediately. "
We teetered for three years on the brink," Cordish says. The developers had leased space to conventional retailers. "This area was too distressed. There weren’t a lot of people who had two cents to rub together. We never got beyond 80 percent leased," Cordish says.
The solution was to convert the mall to a factory outlet center. "Niagara Falls fit perfectly," Cordish says. "That turned the corner. People will travel 200 miles to get to an outlet."
The mall is now in the black. Out of the profits from cash flow, Cordish takes 80 percent, the city gets 20 percent.
Niagara Falls Mayor Michael C. O’Laughlin says that "he [Cordish] was tough, but I always thought he was fair. He didn’t get the best of us."
Other city officials describe the Cordish- Embry duo as tough negotiators, but Embry isn’t so sure. "He [Cordish] and I learned we were not tough enough with the cities. These projects are difficult and we should have asked more from the cities," Embry concludes.
The city’s 20 percent share is more than Cordish would have given up to a bank, but he says, "The city was helping me on my down side when we weren’t making money. A bank wouldn’t protect me on the down side."
Private-public deals are stressful, says Cordish. "When you do a public-private deal, no matter who you’re working with, it’s a nightmare of contentions … When you’re an urban centerpiece, everything you do is in the public eye."
Such attention hasn’t deterred Cordish from answering other SOS calls. In Detroit, Cordish took on the Trapper’s Alley project, a collection of old inner-city warehouses intended for retail renovation, after a local group bailed out. Mayor Coleman Young put in a distress call to Cordish.
Embry and Cordish brought in several limited partners for the $18 million project. Trappers’ Alley, at the foot of Greektown’s main street, opened in 1985. Today, sales per square foot are in excess of $300. Cordish has shifted the financial risk to two Detroit developers. "I have a very passive role," he says.
Cordish later took his road show to Charleston, South Carolina, where he took overdevelopment of a vacant lot in the city’s historic district. The site was earmarked for a convention center, 500-room hotel, and retail specialty shops.
This time Cordish brought in The A. Alfred Taubman Co. of Detroit, one of the country’s biggest developers, as his partner. The developers worked their way through dozens of historical commission sessions to win approval for their plans. "That’s why the city is so spectacular," Cordish says. "They zealously guard their heritage."
The developers took a risk in the retail leasing, pursuing "upper, upper end" merchants. "People thought we were nuts," Cordish remembers. "But King Street, which resembled Howard Street, now looks like Charles Street in its heyday-fine shops with no vacancies."
Why did he succeed when the previous developer failed? "We’re smarter, more tenacious, more nimble, and more creative," Cordish says with no trace of irony. "I was smart enough to get Taubman for a partner. Their clout and abilities were instrumental in persuading retailers to take a gamble like this."
The project is not yet in the black. "We spent too much," Cordish says. "There’s too much debt service on it. This place is gorgeous. We hope in the long run it was a smart business decision." Charleston Place, which opened in 1986, also received an Urban Land Institute Award.
Cordish next boarded the Trolley Square project in Salt Lake City. "This was 100 percent private. There is no public ownership," he says. "But the rest of the deal is a carbon copy of the others."
A private developer had turned three abandoned trolley barns into a retail mall, but then went bankrupt. "It [the mall] had gotten run down. It was tired, to put it politely," says Cordish, who bought the mall from a California savings and loan. He partnered up ina50-50 deal with Mel Simon & Associates, the giant Midwest developer, and renovated the venture from top to bottom at a cost of $45 million.
Cordish sought out the Taubmans and the Simons to ward off the drought of profits from urban developments. "A very important point that is true of all serious urban developments is it’s better to have deep pockets and lots of patience," he says. "What we’re seeing in this real estate debacle is urban projects by developers who don’t have deep enough pockets to ride it through. If we couldn’t have fed Rainbow [in Niagara Falls] year after year, we would have lost it."
Now on Cordish’s plate is a massive project in Houston: redevelopment of the abandoned Albert Thomas Convention Center. Cordish and city officials are still hashing over the elements of the deal.
Closer to home, Cordish is at work on a different kind of project in Philadelphia. He has put together the pieces for a 700- room conference center at University City Science Center, owned by a non-profit corporation of 20 universities and colleges established to promote science and technology.
"Cordish has been able to put together a unique financial package," says Charles Dilks, senior vice president of University City Science Center.
Cordish went international for a portion of his financing. He was able to convince Japanese architect Akira Yamashita, who has an office in Boston, and his family to back the project. "I have to have help from Japan. It has to be somebody who can write a huge check," Cordish says.
CORDISH HAS NOT OVERLOOKED BALTIMORE. He and Embry, who left the firm in 1987, put together a deal for the plot of ground from which the Legg Mason Tower rises, but lost out despite plans to bring in Bloomingdale’s as a retail draw.
"There’s not much market in Baltimore and he’s no dummy," Embry says. "He’s made his money on strip shopping centers. But if something came along that interested him, he wouldn’t hesitate to look at it."
Cordish eyes the Fish market and the Brokerage, his dormant neighbors to the west. "That shouldn’t be," he says. "The right combination, and these projects could be made to work-not that it’s easy."
Meanwhile, Cordish has turned his attention in the past four years to the area north of the Inner Harbor along South Street to the municipal buildings, then toward Gay Street. He bought the Canton House, the headquarters of his empire, and the Furness House, located next to each other at the intersection of South and Water streets. And he has been/buying property on Gay Street.
"This golden grid is where Baltimore is headed," Cordish maintains. "I think it has unlimited potential."
Cordish’s most notable role in the city has been as a mediator. Mayor Thomas
D’Alesandro III called on Cordish during labor negotiations with the city unions in the 1960s. Then-Mayor William Donald Schaefer asked Cordish to head a panel mediating a land-use conflict between Johns Hopkins University and a Wyman Park coalition. He later mediated another town-and-gown dispute involving Loyola College and an adjoining neighborhood. And most recently, Mayor Kurt Schmoke asked him to help out in the neighborhood dispute over development of the Green Spring Dairy site.
"One thing that turns me on is a challenge -something totally different from what I do every day," he says. "If I were a labor lawyer, there’s no way I would do this. I enjoy the art of negotiation and mediation, and it’s public service."
CORDISH WAS BORN IN BALTIMORE IN 1940. At the age of 12, his mother, Ethel, died of a brain tumor and he took charge of his two younger brothers. "He was a help well beyond his years," says his father, Paul, still a practicing attorney at the age of 81. "I think that had a lot to do with his character development."
Cordish graduated from Johns Hopkins University in 1960 at age 19 and earned a law degree at the University of Maryland three years later. His competitive instincts come in part from a life-long affinity for sports. "My raison d’être was sports," he says- including lacrosse, basketball, tennis, swimming, and running.
"I learned how to compete. I learned how good it feels to win," Cordish says. "I also learned you don’t win all the time and you have to come to grips with that. We’re doing so much, there isn’t a day I don’t lose a few. I just hope I win more than I lose."
These days, Cordish is again showing signs of restlessness. He talks about the next five years and the possibilities of going into foreign diplomacy or getting involved in start-up companies.
"Business is business. If you can run a real estate company, you can run a widget company. It’s all common sense and tenacity," he says.
"He derives an enormous satisfaction from the chase," says Paul Cordish of his son. "Accomplishing something seems more important to him than how much he makes."
"If I had been hell-bent on accumulating riches, I would have continued building strip shopping centers," Cordish says. "They are quiet, simple money machines. I prefer a more hands-on approach. I just write smaller checks to charities.