423. The Office-to-Resi Conversion Boom is Just Getting Started with Joey Chilelli, Vanbarton Group

Joey Chilelli (0:00)

So, our goal is that a resident, when they come in to lease a unit, that they would actually never know that it was a former office building.

Haley Kean (0:13)

Welcome to The TreppWire Podcast, the show where commercial real estate meets data and insights. This is a special guest podcast. I'm Haley Kean with Trepp, a data modeling and analytics firm for the CMBS, commercial real estate and CLO markets.

I'm with Lonnie Hendry, Chief Product Officer.

Today, we are joined by Joey Chilelli, partner at Vanbarton Group, a vertically integrated real estate investment manager with a 30-year track record investing in customized real estate strategies for institutional investors. Joey oversees the development and asset management of office, multifamily, and mixed-use assets. He also leads the firm's office to residential conversion platform, overseeing the acquisition and redevelopment of obsolete office buildings and has helped establish Vanbarton as one of New York City's most active office to residential conversion developers. Joey, we're so excited to dig into all things commercial real estate with you today. Welcome to the show and thank you for joining us.

Joey Chilelli (1:15)

Thank you. Thank you, Haley, and thank you, Lani, for having me on. I'm very excited.

Haley Kean (1:19)

So I know I talked a little bit about your background, but we'd love to hear it from you.

You've spent your career across acquisitions, asset management, development and redevelopment, and now are really one of the predominant office to residential conversion players. So we'll get into that later today. But why don't we talk about your start? How did you find yourself in commercial real estate and then ultimately end up with Vanbarton?

Joey Chilelli (1:44)

Yeah. Well, thank you. And I think that it was interesting. I know that some of the guests on your podcast kind of fall into commercial real estate. I, on the other hand, have kind of always wanted to be in commercial real estate. Started off on the construction side, actually understanding how buildings are built, how they operate. And then from there, kind of knew I always wanted to be on the investment side and took a few different paths through the education world, getting an MBA in finance and then a master's in real estate development, and ultimately landing positions more on the kind of project management acquisitions, and then ultimately at Vanbarton in 2016 on the asset management side.

Lonnie Hendry (2:34)

Yeah, it's great. I love having someone on the show that kind of knew they wanted to be in commercial real estate. It's great to hear the stories about how people fell into it, but it's also really cool to see that there are some of us that really, you know, grew up kind of fascinated by buildings, and I think for you, starting in construction is a great story.

You know, we want to get into the Office to Resi discussion. I mean, that's what your primary focus is now, and it's a topic that I think is probably a little bit under discussed. There's a lot of headlines, but there's not really a lot of meat and potatoes discussion, so we'll get to that point. But I think kind of as an entree to that, it's important for us to maybe talk about just the general state of the office market, because I think some of these opportunities are being created, because I would assume the general office market is not functioning as efficiently as it has in the past. We see it with our delinquency data, et cetera. But maybe from your perspective, how would you characterize today's office market? What are you seeing today? And is this a cyclical challenge, or is this a structural disruption?

Joey Chilelli (3:32)

Yeah, I think that it is a structural, and with that is that we have this class A premium office space that is going very strong.

And so, it's a bifurcation of that, and the class Bs and class Cs that are underperforming. And so, I think that it's great that there are some tailwinds that are kind of behind some of the office space in terms of having back to office in place and a lot of the stats of the return to office here. But you see tenants using space differently, or you see them envisioning themselves in spaces much differently than they used to pre-pandemic. And what that has ushered in is the strong dynamic within that class A office space that is well located. So it's central to, say for instance, here in New York, the Grand Central Submarket performing very well. Then there are some other office buildings that might be class C in the garment district that are not performing well. And so it's not a tale of everyone is being lifted up here. But I think that goes back to how spaces are being used today.