As office vacancy rates become affected by the work from home environment and once-busy hotels, resorts and catering facilities find business still soft, some property owners and developers are investigating the possibilities for converting commercial properties to other uses. A panel of key players in Westchester and Fairfield real estate was assembled to explore creative options for the conversion of commercial properties. The event “The Conversion of Commercial Properties; what are the creative options?” was presented by Westfair Communications’ Westchester and Fairfield County Business Journals at the C.V. Rich Mansion in White Plains.
The panelists were: R. David Genovese, founder of Baywater Properties; Jonathan Gertman, senior vice president at The NRP Group; Katherine Kelman, managing director of LMXD; and Martin Ginsburg, principal of Ginsburg Development Companies. The moderator was Eon S. Nichols, partner in the law firm Cuddy & Feder LLP.
“For most people, when they hear ‘conversion’ they probably automatically think office to residential,” Nichols said. “We’ll touch a little bit about that today but we’re ultimately talking about the concept of adaptive reuse and that’s basically the process of using an existing building, an existing property, and developing it for a purpose for what it was not intended.”
Genovese told about having bought 225 High Ridge Road in Stamford for $22 million. The office facility had originally been built at a cost of $65 million 25 years ago.
“Things were going well until I heard the word ‘Covid,’” Genovese said. “Things really slowed down. Thankfully during Covid we had a couple of big relocations from New York that we were able to capture. But, we thought outside the box and we met a group from the Goddard School who wanted to open an enrichment and daycare center, which we looked on as sort of an amenity for our tenants and a service to the community. We created a building within the building.”
Genovese said that the lease with the Goddard School was higher than the office rents that they were achieving while also being lower than the school would have had to pay elsewhere.
Gertman described NRP’s apartment project The Halden being built in partnership with the RPW Group at RPW’s 1133 Westchester Ave. office park in White Plains.
“It was a 70-acre parcel and we had the ability to carve 20 acres off as a subdivision and do 300 rental units which are recently opened and leasing,” Gertman said. “One test will be what’s the reaction of office tenants when they come up for renewal. As RPW does more leasing does it become a two-way positive experience? I think it will.”
Kelman said that a lot of the conversions on which her company is now working are complex. She described the conversion of a former department store into a mixed-use building with a supermarket at ground level and apartments above. Another project involved a parking garage in Newark that was stripped down and rebuilt into a mixed-use structure with retail below and apartments above.
Ginsburg, who undertook a major project in White Plains to add residences, restaurants and amenities to convert what had been known as the Westchester Financial Center into City Square described some of the difficulties that can be encountered in a conversion project. He said that drilling through concrete to provide pathways for new plumbing was risky because cables embedded in the concrete could not be hit. He said that there was a lot of noise, which office tenants who remained in the buildings found disturbing. Ginsburg said that his conversion of the former convent of the Episcopal Sisters of Saint Marys property in Peekskill into The Abbey Inn & Spa has been highly successful both at preserving the architecture and creating a new business.
“You read headlines that 40% of offices are empty, but that means that six out of 10 tenants are there and they have leases and they start to use it everyday,” Gertman said. “Unlike residential those leases don’t roll over every 12 months. You have to have this very long period of consciously thinking about emptying the building to get it to a point where you can do that construction without being sued by your existing tenants. During that time, all that cash flow is declining. It’s a very tricky thing to do.”
Genovese said that a few years ago the City of Stamford had looked at the possibility of converting office buildings into schools rather than building new schools.
“We thought we could deliver to the City of Stamford public schools in these buildings on a long-term lease at a fraction of the cost that they would incur if they would actually locate a site, or take control of a town-owned site or city-owned site and build new,” Genovese said. “Some of these populations are growing. Some of these old school buildings are physically or functionally obsolete. I hope that’s an idea that somebody will be able to execute on in the future because there’s a good opportunity there if you can align the expiration of the leases with the need to do something dramatic with the building.”
Gold sponsors for the June 8 event were Turner and the Cappelli Organization. Turner’s Connecticut office employs more than 200 people and handles more than $400 million in construction annually. The Cappelli Organization has a proven 45-year track record of excellence in completing more than 30 million square feet of develiopment.
Bronze sponsors were: The Building & Realty Institute; The RPW Group; Cuddy & Feder LLP; Tompkins Excavating; Ginsburg Development Companies; elm eastern land management; NY Hospitality Group.
