Orlando-Area Hotel Conversion Joins Growing Trend
- May 25, 2021
Champions World Resort, a 435-key hotel and conference center in Kissimmee, Fla., will become a 352-micro-unit, market-rate apartment complex as part of a nearly $14 million redevelopment, one of many hotel-to-housing conversions that are becoming a trend across the U.S.
Interior demolition began this month at the site at 8660 W. Irlo Bronson Memorial Highway, a main commercial thoroughfare in Kissimmee, located near Walt Disney World and Universal Studios in Orlando, Fla. Miami-based ICM Development Group, led by Carlos Balzola, is developing the project—dubbed Champions Village—and BCC Construction, a division of Prospect Real Estate Development Group headquartered in New Smyrna Beach, Fla., is the general contractor. Construction is expected to take about 12 months with the first tenants moving in late spring 2022.
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The redevelopment plan calls for 233 studio and 119 one-bedroom micro-units to be developed, according to Richard Zahn, Sr., chairman of BCC and PREDG. Zahn has completed multiple hotel-to-apartment and apartment-to-condo conversions in more than two decades in construction and development.
Balzola’s company was also part of the recent $40 million conversion of the former 555-room Red Lion Hotel Kissimmee Maingate at 7300 W. Irlo Bronson Memorial Highway. ICM formed a joint venture with Cornerstone Property and T2 Capital Management to buy and redevelop the former hotel into a 339-unit workforce housing property with 28,000 square feet of retail space. Construction began early last year and is expected to be completed shortly.
Zahn described the Champions Village redevelopment as workforce housing. The completed project is projected to fill a void for workers at Disney and other resorts in the Orlando-Kissimmee market that are priced out of other types of housing in the area.
The hospitality industry and cities and resort areas across the country had taken a hit with the COVID-19 crisis—but these kinds of properties can be put to good use. According to Zahn, this trend could be “taking hold anywhere there’s a need for conveniently-located, quality rental properties that working people can afford.”
Interest in conversions has grown in the U.S. during the pandemic. According to a JLL report on hotel conversions states, “recent activity suggests the total market value of hotels sold for conversion over the next five years will range between $25 billion and $30 billion.” Repurposing projects include converting hotels, often extended-stay properties that already have bathrooms and kitchenettes, into multifamily, student or senior housing.
Mary Ann Barnett, a senior managing director-affordable multifamily practice leader at BBG, a national valuation and property assessment firm, told Multi-Housing News the number of conversion deals the practice has worked with has grown during the pandemic. The firm has worked on four hotel conversions in Phoenix, two in Charlotte, N.C., and two in California in Salinas and San Bernardino.
Barnett expects to see more of the conversion trend citing the difficulties experienced by hotel operators in 2020 and increased interest in addressing the affordable housing shortage as drivers.
“Some are being converted to Single Room Occupancy (SRO) housing to address either the homeless transitional housing need or providing studio units that are more affordable on a monthly basis to individual renters, while some are being converted into more traditional apartment uses by combining hotel units to create one-, two- or three-bedroom units or by converting extended-stay hotel units directly into apartments where the kitchens are already installed,” Barnett told MHN.
In addition, some hotels are converted into senior housing, as the design translates easily from a typical mid-rise hotel to senior housing with elevators and common areas on the first floor, she noted.
From a financing standpoint, it may make more sense to convert a hotel to housing because of the rising costs of construction and land prices. If a developer enters into a Land Use Agreement, Low-Income Housing Tax Credits may be available to help fund some, if not all of the conversion costs, Barnett said. It can also be easier to convert older hotel stock to “circumvent some of the zoning, entitlement and NIMBYism issues that come with new development in certain markets like Austin and Portland,” she added.