Kofi Meroe, a director at Washington, D.C.-area development firm Foulger Pratt, says companies need to do some homework before committing to turning an office into a residence.
First off, firms need to weigh a project's viability against the cost of complying with local codes and regulations.
Last year, his team completed a conversion of a property near the White House into a 243-unit building now known as Accolade — with a mix of 186 market-rate apartments and 57 short-term-stay units. Knowing the local construction and zoning rulebooks played an important role in the project's completion, Meroe said at a recent forum on downtown Washington's economy.
"Ultimately, the most important thing any team must really understand before they embark on one of these projects is understanding where your real estate sits in the context of the local policies and the zoning rules," Meroe said. "There is no separate building code for conversions. We have to meet the same building code and performance standards as if I'm building from scratch."
Another important step: Take time and care to avoid misinterpreting the rules, a mistake that could be quite costly and set back the timeline on already complicated and expensive projects. Downtown Washington is already behind on a residential conversion goal to create 10,000 units by 2033, according to a report by the DowntownDC Business Improvement District, citing CoStar data.
Born in the United States and raised mainly in West Africa, Meroe earned a bachelor's degree in hospitality and tourism management from the University of Massachusetts Amherst Isenberg School of Management. His previous experience in commercial real estate includes serving as a development manager at Dantes Partners, where he worked on multifamily projects. He also co-founded Ikemba Investment Group, a firm that raised and invested money for real estate development in Africa's emerging economies before joining Foulger Pratt in 2017.
Meroe spoke with CoStar News about his experience transforming a workplace into a multifamily building and the guidance he'd share with others. The following conversation has been edited for length and clarity.
What advice do you have for developers converting offices into residential uses?
Understanding the context in which your real estate sits; understanding your zoning, building codes, accessibility; having a team that really understands all the constraints that you'll have on your project and understanding them from Day One, is critical for office conversions because you don't have the level of flexibilities you may have in some new builds.
In my opinion, most of these conversion deals are already tight on the yield, so something like missing the right accessibility standards where you have to upgrade a bunch of stuff, or move elevators, it can make a project become unviable very quickly.
Would you encourage others pursuing office-to-residential conversions to incorporate multiple uses?
Yes, absolutely. Office buildings can be very large and so sometimes you don't need all the space.
The Accolade is 243 units. These are luxury apartment units, and 243 felt a little heavy to us trying to absorb that in downtown. We took the bet, and we feel like the city's downtown will reimagine itself and it will become a great place to live and that residential stock will start to outweigh some of the office stock. But we didn't want to try to swing for the fences and assume that downtown would be able to absorb 243 luxury apartments.
Beyond that, even if we felt it could, it was very accretive to introduce a use like the short-term rental units that operate like a furnished hotel. It really worked for us to diversify the use, but also make the model more accretive and give the building a better chance to be successful.
It doesn't have to be another form of housing. If there's a couple of floors you want to peel off and you want to make it something else, whatever it is that you think can fit the space, I encourage people to do it. We need to be looking at these buildings as platforms for multiple uses and multiple different experiences.
Should more incentives exist for office-to-residential conversions in Washington? Did you use any for the Accolade transformation?
There is more work to be done to creating more cohesive systems and environments and levels of incentive for more of this work to happen faster. Are there expedited reviews that we don't necessarily have to pay a ton of money for?
If we are saying that this is a city goal to see more of these sorts of projects happen, then why aren't we creating a priority in the review system for planning? Why aren't we creating a priority for these sort of projects we say we need that's not part of a pay-for-play system?
We started too early to use one of the existing conversion abatement programs in D.C. We financed this project in 2022, when the financial markets were just chaotic. We figured it out on our own and completed it in October of last year.
Is Foulger Pratt eyeing other conversion projects in the city?
I'm looking, and what I am telling people is we are open. I frankly haven't seen anything that is a slam dunk. One of the other challenges is even if I did find one, am I going to be able to convince the equity partner to invest their money here in this project versus Northern Virginia or some other place like that.
The money sources that we need to do these projects are not necessarily keen on being in certain places at the moment. It's an election year, I'll be honest, people are just waiting to see what happens.