Long Beach Office Building Sells With Eye on Apartment Redevelopment

Holland Partners has acquired Congressional Place, a 73,769-square-foot office building in Long Beach, from ValueRock Realty for $41 million. Holland plans to redevelop the property into apartments. ValueRock plans to roll the proceeds from the sale into a 1031 exchange deal.

Located at 6700 East Pacific Coast Highway, Congressional Place is a two-story building on 2.5 acres with views of the marina and ocean. It is near several major freeways and has a high walkability rating. All of these details made it an ideal location for a multifamily project. Newmark managing director Anthony Muhlstein, one of the brokers that worked on the deal, said, “Given the disparity between office and multifamily market fundamentals and favorable zoning, office is no longer the highest and best use of this property.” Muhlstein represented the seller in the deal along with Newmark senior managing director Chris Benton, co- head of capital markets Kevin Shannon, vice chairman Bill Bauman and executive managing directors Ken White and Sean Fulp.

Apartment conversion projects have become wildly popular in the aftermath of the pandemic, which reallocated demand. Office properties were among the asset classes to suffer, while apartment demand is soaring. Of the apartments buildings currently slated for construction, 42% are office conversions, according to a RentCafe analysis of Yardi Matrix data. In fact, former office buildings make up a quarter of the units that will become available this year.

Office buildings aren’t the only fodder for new apartment construction. Extended-stay hotels are also an ideal candidate, largely because they are usually in zoning-friendly areas for conversion and have an existing footprint that accommodates an apartment use. While these conversion projects have always been on the table, David Reina, a partner in Morris, Manning & Martin LLP’s Hospitality Practice, has never before seen them happen at the current scale. “When it became clear that the pandemic was going to be a multi-year suppressor of demand, more hotel owners began seeing sales for conversions as a viable exit strategy,” he told GlobeSt.com in an earlier interview.

Investors are putting money down to actively pursue these opportunities. Last year, TF Management Group increased its capital allocation for hotel-to-multifamily conversions as part of its fund allocation strategy. TF Management launched Tempo Growth Fund to focus on apartment-to-hotel conversions and other real estate strategies.  This fund started to raise capital in 2020 closed January. It is investing in multiple conversion opportunities, including two extended-stay Residence Inn conversions to housing in Winston-Salem, NC and South Bend, Ind., two Ramada Inn conversions in Mesa, Az., and New Braunfels, Texas, a Best Western hotel conversion in Longmont, Col., and a transformation of an office building to multifamily housing in downtown St. Louis (which is across from the Cardinals ballpark).