If You’re Jumping Into Office Conversions, You’ll Quickly Find That You’ll Have a Lot on Your Plate
In early Q3, the Biden Administration announced plans to help developers convert office buildings — which have been struggling since the pandemic — into multifamily housing by offering loans at below-market rates and continuing to identify opportunities for the best possible office conversions. This follows an already historic period of office conversions, which were at an all-time high in Q4 -22.
While this has been seen as a positive move for the industry, it isn’t without its challenges. As some in the industry have noted, the process of converting an office into multifamily housing is no simple feat. Doing so requires careful evaluation and planning of multiple aspects of the structure in order to prepare them for a different kind of use.
Examples include replacing, refreshing, or repairing HVAC systems, plumbing infrastructure, windows, fire controls and life safety systems, rethinking and reconfiguring floor plans for residential occupants, and more. Some markets, such as California, even require environmental additions such as earthquake retrofitting.
Each of these projects requires careful management — both operationally and financially — in order to get them completed and keep the office conversion on track. And that’s all before or while you’re actively engaging with banks, equity partners, and private investors to raise capital for the property.
For any GP considering getting into office conversions now or in the near future, the need to execute programs of this magnitude will require technology that consolidates its many phases and tasks in order to make it manageable and ensure not a single detail is missed. Just some of these include:
- Creating promotional and financial projection assets to inform and engage investors
- Promoting the asset to an existing investor database and tracking interest
- Managing pro rata, waterfall, private equity, and deb ownership structures
- Securing, coordinating, processing, and tracking fundraising activity
- Managing a variety of payment types to vendors and other involved parties
- Tracking and managing projects related to the office conversion
- Calculating and issuing automated quarterly distributions to investors
- Reporting on the performance of the office conversion over time
- Creating bank accounts, managing transactions, and tracking activity
Office Real Estate Outlook: 2023 & Beyond
Learn more about where the office asset class stands and explore a variety of revenue-generating opportunities related to office assets. Download your free guide now.
Other Possibilities with Office Conversions
Industry professionals have noted that not every office building has the necessary bones to be converted into housing. In some instances, only part of the property can be converted. This creates an additional opportunity for mixed-use developments. Already a popular opportunity for commercial real estate, mixed-use adds more complexity but also more revenue channels via retail, hospitality, and other use cases.
In these instances, leaning on a commercial real estate investment management solution will also be critical. Different codes and regulations will need to be met, investors with different goals and philosophies may be interested in the non-housing aspects of the asset, and countless other details will need to be managed. Firms exploring mixed-use will have greater need than ever to automate and streamline as much of the process as possible.
- Learn how Covercy supports GPs, syndicators, and others with managing multiple traditional and alternative asset classes.
Empower Your Office Conversion Strategy with Covercy
Whether you’re just beginning to explore the opportunities available with office conversions or you’re looking to streamline management of other commercial real estate assets, Covercy is the best solution available today.
As the first real estate syndication platform where banking meets investment management, Covercy enables GPs and other industry professionals to save time, money, and effort with automated distribution, capital call payment processing, fundraising solutions, document and file management, database management, investor portals, and more. And to sweeten the deal, capital funds held in Covercy Wallet generate strong interest while providing you with streamlined, consolidated banking functionality.
Put Covercy to the test for your business. See it in action in a private demo now.