PEG Cos. is tackling its 14th conversion of an extended stay hotel into workforce housing with an acquisition in Austin, Texas.
The company acquired Habitat Suites Austin from an undisclosed seller in January and immediately began updating the property. PEG Cos.’s plans call for the conversion of the former 96-key extended stay hotel into a Class B community by early summer this year.
PEG Cos. is planning to add a fitness center, workspace areas, cosmetic improvements alongside other updates as part of the conversion to a residential space. However, one of the hotel’s former buildings is being leased out in its current state. Ali Monsen, PEG Cos.’ director of marketing and public relations, told Multi-Housing News that the company inherited residents who had been staying at the extended stay hotel and allowed them to lease the spaces as they were. Monsen also told MHN that the residents wouldn’t be displaced and instead be allowed the ability to move over into new and improved units when they were completed.
Located at 500 E. Highland Mall Blvd., the converted community will also be next to a former mall that is being redeveloped into 1.3 million square feet of space for Austin Community College’s campus, 800,000 square feet of office space, 150,000 square feet of retail space, 1,200 apartments and outdoor spaces.
A RISE IN CONVERTING HOTELS DUE TO COVID
According to PEG Cos., Habitat Suites Austin is the third acquisition of its latest fund, the PEG Extended Stay Conversion Fund L.P. The company is currently raising the $150 million fund, following an earlier similar fund that saw 11 acquisitions of extended stay hotels.
Cameron Gunter, PEG Cos.’ CEO, said in prepared remarks that many other companies are joining the trend of converting extended stay hotels into residential properties due to the financial burdens that COVID-19 caused throughout the hospitality industry.
Gunter added in his prepared remarks that PEG Cos. has been following this strategy since 2018 and has very selective criteria when it comes to pursuing these projects. The company’s strategy focuses on urban and suburban markets with high rental occupancies, projected growth metrics and strong sales of comparable Class B units. According to PEG Cos., the population within a 3-mile radius of its Austin hotel conversion is projected to grow 10.3 percent within the next five years. The company’s strategy has also brought it to Utah where it is working on a 195-unit apartment community in a Salt Lake City Opportunity Zone.