The partners acquired 1255 23rd Street in Washington's West End for conversion from office to housing.
Jemal Real Estate Strategies and DivcoWest announced a joint venture to convert 1255 23rd Street, an office building in Washington's West End, to residential use. The firms disclosed the acquisition on October 8.
The property sits in the West End neighbourhood of Washington. The partners did not disclose the purchase price or the planned unit count for the conversion.
Norman Jemal leads Jemal Real Estate Strategies, a firm active in urban repositioning projects. DivcoWest is a real estate investment firm with holdings across major US markets.
The deal follows a string of office-to-residential conversions in the Washington area as owners grapple with elevated vacancy and changing tenant demand. Office leasing in the district has lagged the national recovery, and conversion projects have emerged as one route to redeploy capital in buildings facing structural headwinds.
The firms did not specify a timeline for the conversion or detail the planned residential configuration. West End has historically commanded strong residential rents, supported by proximity to Georgetown, Dupont Circle and downtown employment centres.
Conversions typically require rezoning approvals and often entail gut renovations to reconfigure floor plates and add residential systems. The economics hinge on the gap between distressed office pricing and stabilised residential values, net of construction costs.
The partners did not announce construction financing or an equity partner beyond the joint venture structure.
The Deployment Angle
Family Office Real Estate Daily Desk · our analysis, not the source's
This transaction exemplifies the preferred-equity or co-GP opportunity in office conversions — a play on the spread between distressed CBD office pricing and stabilised multifamily values, levered by municipal tailwinds for housing supply. Family offices entering such deals typically target a basis 30 to 40 percent below replacement cost for new residential construction, which justifies the execution risk of entitlement, demolition and vertical redevelopment.
The deployment route is almost always co-GP capital alongside a sponsor with local zoning expertise and a construction track record — not a passive LP stake in a commingled fund. Conversions demand hands-on asset management through permitting delays, budget overruns and lease-up risk, and single-asset governance gives the principal line-of-sight control that blind-pool vehicles do not. Direct ownership is viable only if the family office has an internal development team or is prepared to hire third-party project management at a fee drag of 3 to 5 percent of hard costs.
Underwrite three downside scenarios: a 15 percent cost overrun, a six-month permitting delay, and a lease-up pace half the pro forma — because conversion projects routinely hit all three. Price in an extra 200 basis points of contingency capital and size the equity cheque so that even a worst-case stabilisation still delivers a mid-teens levered return. If the numbers do not work under that stress test, the opportunity is speculative, not patient capital.
Avoid conversion deals pitched on CBD office scarcity or post-pandemic work-from-home reversal — those are macro calls, not underwriting. The bet here is site-specific: West End residential fundamentals, the sponsor's permitting relationships, and the all-in construction cost per square foot relative to comparable new-build rents. If any of those three is a guess rather than a documented baseline, walk.
