Two months after launching a $1B venture targeting office-to-residential conversions, TF Cornerstone and Dune Real Estate Partners have already identified three buildings to turn into apartments. 

The fund, Alta Residential, is pushing to foreclose on a historic property in Philadelphia after buying a piece of the building’s distressed debt. It is also getting started on converting an office TF Cornerstone owns in D.C.’s central business district and is in final negotiations to take over a New York City property, TF Cornerstone principal Jeremy Shell told Bisnow in an interview.

The Fairfax, TF Cornerstone’s residential conversion of the former FBI headquarters in NYC.

Many of Alta’s projects will arise from distress in the office market and taking over problem loans, Shell said.

“A lot of these office buildings that are good conversion candidates, the values have eroded to the point where really the controlling position is in the debt,” he said. “So we’re looking at a lot of debt positions.”

The first target is the 1.4M SF Wanamaker office building in Center City, Philadelphia, where TF Cornerstone purchased the majority of the property’s CMBS loan. The foreclosure isn’t finalized — the building’s owner, Rubenstein Partners, placed it in bankruptcy proceedings last year — but Shell is optimistic.

“When we’re ultimately successful with that, we’re planning a conversion and repositioning of that historic building, which is very exciting,” he said.

TF Cornerstone, founded by brothers Fred and Thomas Elghanayan, owns and operates almost 12,000 residential units in Manhattan, Brooklyn and Long Island City as well as more than 4M SF of commercial, office and retail space between NYC; Washington, D.C.; Virginia and Pennsylvania.

The Alta fund, a partnership with New York-based Dune, is aiming to take on between 20 and 25 projects in total, Shell said, putting around half the equity toward deals in NYC and deploying the rest in target markets, including Boston, Atlanta, Charlotte, Raleigh, Los Angeles and San Francisco. 

The venture’s next projects could come from purchases out of foreclosure, buying debt and pursuing joint ventures with “people or banks who are in a situation where they need to ultimately reposition the office building that they’re currently sitting on,” Shell said.

The Elghanayans are no stranger to conversions. In 1997, Thomas Elghanayan — then president at Rockrose Development, a firm run by his two other brothers — converted 45 Wall St. from office to luxury residential as part of the Lower Manhattan Revitalization Plan. 

“Conversions are where Tom and Fred originally cut their teeth and had a lot of success over the years,” said Shell, who is Tom Elghanayan’s son-in-law. “We’re really excited to be going back into that space, now that the opportunity has presented itself.”

Including 45 Wall St., TF Cornerstone has completed 15 office-to-resi conversions spanning almost 5M SF, according to a company spokesperson. It also pulled off residential conversions at 95 Horatio St., which was previously a refrigeration facility in Manhattan’s Meatpacking District, and the Upper East Side building that used to house the FBI’s NYC headquarters. 

In the five boroughs, Alta is looking specifically at properties in the Financial District, Midtown, and parts of Brooklyn. 

The joint venture has a long history. Elghanayan worked with Dune CEO Daniel Neidich when the latter was at Whitehall Real Estate Funds, a hedge fund and private equity firm. Shell worked with Neidich after business school, Commercial Observer reported. 

Policy measures passed last year, including the 467-m tax break at the state level and the City of Yes rezoning that opens up more property conversions, have made conversions an appetizing pursuit for the first time in more than a decade, Shell said.

“Values of office buildings have come down, the incentives from the state are there in terms of tax abatements, and we think there’s a lot of opportunity that we’re going to be able to take advantage of in that space in New York,” Shell said. “I’m really excited about that because we haven’t seen that over the last 15 years, as much.”

Converting office buildings into housing has been pitched as a potential solution to two problems that cities across the U.S. are facing — what to do with older, underutilized office properties and how to create much-needed housing amid shortages across the country.

But ultimately, while conversions present an opportunity to take a chunk out of the housing crisis, Shell believes more policy action is needed.

“Conversions are not going to be the panacea or cure-all for New York City’s housing supply issues. Far from it,” he said. “It’s one tool that’s needed, and will generate thousands of new apartments and thousands of affordable apartments, but we need a lot more than that in order to address the housing shortage.”

With the rate of office-to-residential conversions accelerating, a new venture has formed with plans to pursue $1B of the notoriously complex developments.

The former New York City FBI headquarters building converted to apartments by TF Cornerstone at 201 E. 69th St.

Dune Real Estate Partners and TF Cornerstone formed Alta Residential, a joint venture that plans to target buildings with high barriers to entry in transit-oriented residential neighborhoods. The partners are eyeing New York City, Washington, D.C., Boston, Charlotte, Raleigh, Atlanta, Dallas, San Francisco and Los Angeles, according to an announcement by the two New York City-based firms.

“Investors have reacted very positively to Alta as a means to access high quality urban residential, and we have already received significant interest from a wide range of investors,” Dune CEO Dan Neidich said in a statement.

TFC, founded by brothers Thomas and Fred Elghanayan, has developed more than 21M SF of residential and commercial properties, mostly in their hometown of New York. The company was formed in 2009 after a coin toss decided how they would break up the $3B real estate empire they owned with their brother, Henry, who runs Rockrose Development.

The private developer owns and operates nearly 12,000 residential units in Manhattan, Brooklyn and Long Island City, along with over 4M SF of commercial, office and retail space in New York, D.C., Virginia and Pennsylvania.

TFC has completed 5M SF of commercial to residential developments across 15 projects. Those conversions include 95 Horatio St., a former refrigeration facility in Manhattan’s Meatpacking District that was converted to 318 residential units, and The Fairfax, a former New York City FBI headquarters building at 201 E. 69th St., which was converted to 313 residences.

As part of the joint venture, TFC plans to oversee and partner with Alta to convert certain New York City office buildings into apartments, according to the announcement. A spokesperson couldn’t provide further details prior to publication.

In a statement, TFC CEO Thomas Elghanayan said that he is “confident that we’ll be able to scale Alta very quickly.”

Dune brings with it opportunity fundraising experience, according to the announcement. Since launching in 2005, the firm has raised over $4B of equity capital, including through its funds and other investment vehicles. It invests on behalf of public and private pension funds, sovereign wealth funds, educational endowments and other large institutions as well as high net worth investors. 

It has experience with bold projects in the city — it is a partner with Turnbridge Equities on the Bronx Logistics Center, a 1.2M SF industrial development that was one of the first multistory warehouses in the city. A deal was in place for New York City to lease or buy it for as much as $670M, but that was scuttled after a New York City Council oversight hearing looked into real estate contracts handed out by Mayor Eric Adams’ administration.