Dive Brief:

• Last week, New York City-based real estate investment firm Dune Real Estate Partners and New York City-based residential and commercial developer TF Cornerstone announced the creation of a $1 billion venture, Alta Residential, to convert office buildings to residential uses.
• Alta will target properties in metros with high barriers to entry in desirable, transit-oriented residential neighborhoods, including New York City; Washington, D.C.; Boston; Atlanta; Dallas; San Francisco; Los Angeles and Charlotte and Raleigh in North Carolina.
• Dune and TFC intend to source, analyze and evaluate conversion opportunities on behalf of Alta, according to the news release. They will provide construction oversight of local developer joint ventures by leveraging TFC’s construction capabilities. The companies expect to develop certain New York City projects jointly.

Dive Insight:

Dune and TFC see conversions as “a generational opportunity given the scale of the distress in office real estate together with the unmet demand for housing in the U.S.,” according to the press release. 

Other sources echo these sentiments. In August, Yardi said more than 1.2 billion square feet of office buildings — 15% of total stock — were quality residential conversion candidates.

TFC, which has developed more than 21 million square feet of residential and commercial properties over five decades, has previously completed 15 commercial-to-residential developments, totaling nearly 5 million square feet. 

“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,” said Thomas Elghanayan, CEO of TFC, in the release.

Dune and TFC aren’t alone in pursuing conversions. Los Angeles-based developer Jamison Properties is expanding its portfolio of over 1,000 adaptive reuse units in Southern California with a 13-story office conversion, now underway in LA’s Koreatown.

Although there is a need for more housing in urban areas, not all office-to-residential conversions have been successful.

In April, Arbor Realty Trust foreclosed on 41 Marietta St., a 13-story, 135,000-square-foot office tower in downtown Atlanta that was slated to be turned into a 120-unit apartment building, according to Bisnow.

Then in September, Sandy Spring Bank filed for foreclosure on Chasen Cos.’ One Calvert Plaza office tower in Baltimore after the developer went into default on a $34 million loan in June, according to the Baltimore Banner. The developer bought the historic 15-story building for $11.1 million in 2022 with plans to convert it into 173 apartment units.

Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.