Silverstein Raising $1.5B Office-To-Residential Conversion Fund

Silverstein Properties Chairman Larry Silverstein
Bisnow/Andrew Nathanson
Silverstein Properties Chairman Larry Silverstein

One of New York's most prominent office developers is raising a huge fund to put some office buildings out of their misery.

Silverstein Properties is seeking to raise $1.5B to fund office conversions, hoping to acquire washed-up office towers in New York and other major cities and redevelop them into apartment buildings.

That $1.5B could be just the start, Silverstein CEO Marty Burger told Bloomberg in an interview. Silverstein sees a potential “$10 billion-plus” opportunity in office conversions, he said. Eastdil Secured is serving as Silverstein’s adviser for the fundraising.

Silverstein is targeting Manhattan office buildings where debts may be beginning to pile up or those with high vacancy rates. These properties are the sole focus for the developer’s acquisitions team, Burger said.

“Now is the perfect storm where office is not in favor, and the residential market is very hot,”  Burger told Bloomberg. “Hopefully we can acquire some of these office buildings that may be obsolete or may not be their highest and best use as an office building, and convert them to residential use, which the city desperately needs.”

Silverstein is also looking beyond its home market to cities facing similar obstacles, such as Washington, D.C., Boston and the West Coast.

Silverstein has already begun its foray, snagging a 30-story office tower at 55 Broad St. in Manhattan’s Financial District, in May this year. Its partner on the project, Metro Loft, is a leader in conversions in NYC, having built 5M SF of residential property from former commercial buildings, according to its website.

Together, Silverstein and Metro Loft plan to turn 55 Broad into market-rate housing, as Metro Loft has already done with multiple other FiDi buildings.

Last year, Silverstein also acquired 116 John St., another former FiDi office-turned-residential property converted by Metro Loft that now features 416 units, according to StreetEasy.

Appetite also exists for financing conversions: In late August, the Vanbarton Group scored a $272.5M construction loan from Brookfield Real Estate Financial Partners for its conversion of 160 Water St. Vanbarton plans to turn the 24-story office tower into a 30-story multifamily building.

But office conversions are costly and can be difficult to execute, depending on a range of factors from the building’s floor plates to how its water pipes and electricity infrastructure is built into the building. Another obstacle that makes NY office conversions trickier is the state’s multiple dwelling law, which requires bedrooms to feature windows of a certain size that open out into the street.

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