Investors Launch $1B Fund to Flip Empty U.S. Offices Into Apartments

With empty offices weighing on cities across the country, a pair of New York real estate firms are betting big on office-to-residential conversions, creating a ten-figure fund to cultivate conversion projects nationwide.

Investment group Dune Real Estate Partners and developer TF Cornerstone have formed Alta Residential, a $1 billion venture to identify and support office-to-residential projects in U.S. markets that provide much-needed housing in “high barriers to entry with desirable, transit-oriented neighborhoods,” the partnership said on Tuesday. Initial targets for the fund include cities like Washington, D.C., New York City, Boston, Dallas, Atlanta, San Francisco and Los Angeles. 

“Given the need for owners of underperforming office assets to reevaluate the highest and best use of their properties, combined with ever-increasing need for new housing, we are confident that we’ll be able to scale Alta very quickly,” Thomas Elghanayan, CEO of TF Cornerstone, said in a statement.

TF Cornerstone has extensive experience with office-to-resi conversions, having completed 15 projects with a combined 5 million square feet. Some of those developments include a property in Manhattan’s Meatpacking District that was converted to 318 residential units, as well as the conversion of the FBI’s former New York headquarters to a 313-unit building re-dubbed The Fairfax. 

Despite a growing slate of conversion projects in major office hubs like New York, D.C. and L.A. since the pandemic hit, especially as office vacancy remains stubbornly high in the latter two, identifying which buildings are right for conversion is easier said than done. An August report by CommercialEdge found that less than 15 percent of the U.S.’s office stock are ideal candidates for conversion due to their features, locations, and environmental factors. 

Nick Trombola can be reached at ntrombola@commercialobserver.com.