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Vanbarton Pays $95M for Office Conversion Project

Vanbarton Group is paying about $95 million to acquire a downtown Manhattan office tower and convert it into a residential property, according to a report from Bloomberg, citing people familiar with the situation.

The real estate investment firm plans to turn the asset, known as 77 Water St., into up to 600 apartment units. Currently, the 26-story office tower features 575,000 square feet of space and includes tenants such as Goldman Sachs Group Inc., Lewis Brisbois Bisgaard & Smith, and AT&T Inc.

According to workspace provider Sage, which partially owned the building, 77 Water St. is a 1970s property that has gone under renovation and been modernized. The property is within a several-minute walk of the South Ferry and the World Trade Center.

Remote work picking up since the pandemic has led to more unoccupied space. While fundamentals have been improving, office visitations in Manhattan for July averaged only 72 percent of 2019 levels.

Developers like Vanbarton take note of that trend and are looking to revitalize those assets. CBRE said in a report that it expects office conversion projects to double this year compared with 2023. In the first quarter, 70 million square feet of office supply went under conversion, up from 60 million SF in the third quarter of 2023. Costs for conversions are typically between $250 and $650 per SF. But interest rates starting to fall, makes affordability easier for developers.

In New York, Vanbarton has worked on multiple other office-to-residential transformation projects. This includes Pearl House, which was redeveloped into 588 rental luxury units, and 160 Water St.

Also, at least 64 office building operators in New York City have reached out to NYC's Office Conversion Accelerator Program, which aims to address the metro area's housing shortage. The city is aiming to convert offices into 20,000 apartments over the next 10 years.

Vanbarton's deal for 77 Water St. is expected to close before the conclusion of 2024, with Eastdil Secured serving as the advisor on the transaction.

Reprinted with permission from the Wednesday, 09 October 2024 04:52:17 EST online edition of GlobeSt © 2024 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.