TF Cornerstone Seeks Office Distress For $1B Conversion Fund

Two months after launching a $1B venture to convert distressed office buildings into apartments, TF Cornerstone and Dune Real Estate Partners identified three initial projects, including a Philadelphia office building facing foreclosure.

The Alta Residential fund is actively pursuing distressed assets across the country, capitalizing on falling office property values and new policy incentives, according to Bisnow.

Targeting Distressed Offices

The first major acquisition under the fund is the 1.4 MSF Wanamaker Building in Center City, Philadelphia, where TF Cornerstone acquired a controlling stake in the CMBS loan as part of a potential foreclosure.

The building’s owner, Rubenstein Partners, filed for bankruptcy last year, but TF Cornerstone is optimistic about completing the takeover and converting the space into apartments.

“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,” said TF Cornerstone principal Jeremy Shell.

The firm is also beginning work on converting an office building it owns in Washington, D.C., and is finalizing negotiations to take over a New York City property for conversion.

More Office-to-Resi Conversions

TF Cornerstone, founded by brothers Fred and Thomas Elghanayan, has a long history of office-to-residential conversions, having converted 15 office properties totaling nearly 5 MSF. Notable past projects include:

• 45 Wall St. in Lower Manhattan, converted in 1997
• 95 Horatio St., a former refrigeration facility in the Meatpacking District
• The former FBI headquarters in NYC’s Upper East Side

Now, the Alta fund aims to take on 20–25 conversions, with roughly half of its equity targeted for NYC and the rest spread across key markets including Boston, Atlanta, Charlotte, Raleigh, LA, and San Francisco.

Policy Incentives

Conversions are gaining traction due to declining office property values and new policy incentives. New York has introduced:

• The 467-m tax break, offering tax abatements for conversions
• City of Yes rezoning, which expands opportunities for office-to-residential conversions

“These incentives, combined with falling office values, make conversions a compelling opportunity,” Shell said. “We haven’t seen this kind of environment for conversions in over 15 years.”

The Bigger Picture

While office-to-residential conversions are seen as a potential solution to both the housing shortage and declining office demand, Shell believes they are only one piece of the puzzle.

“Conversions will generate thousands of new apartments, including affordable units, but they’re not a cure-all for New York City’s housing supply crisis,” he said. “Much broader action is needed.”