Reading Progress:

Hotel-to-Multifamily Conversions

Perspectives, Syndications

Helping address the need for housing as hospitality recovers and evolves

Though COVID-19 travel prohibitions and mask mandates are relaxing throughout the country,1 industry experts predict that it may take until 2023 or later for the hotel industry to recover to pre-COVID-19 levels.2 Berkadia notes in a 2021 article that “a number of the hardest hit properties in the pandemic were approaching obsoletion well before March 2020,” with many urban destinations already impacted by low occupancies and declining revenue per available room prior to the pandemic. 3

At the same time, alternatives to traditional hotels continue to thrive as economies slowly reopen.4 The National Association of REALTORS® (NAR) noted in a May 2021 report that “Airbnb has 4 million hosts worldwide, about as much as the combined number of rooms managed, franchised, leased, or owned by the Hyatt Hotels Corporation, Choice Hotels International, Intercontinental Hotels Group, Hilton Worldwide Holdings, and Marriott International,” providing considerable competition to traditional hotels.5

Meanwhile, the available supply of housing continues to trail demand,5 especially as pandemic conditions have changed demands for rental housing.6

From 2010-2020, the number of new single-family and multifamily homes that became ready for occupancy was 6.3 million units behind the demand “arising from household formation and to replace housing lost to demolition or obsolescence,” the NAR report notes, leading rental housing to become increasingly unaffordable, especially to low-income tenants.5

Investors are increasingly recognizing the opportunity to meet this demand by converting these obsolete and struggling hotel assets into much-needed multifamily housing.7

Fairway America was excited to have one of our successful hotel-to-multifamily conversion projects featured as a case study in the May 2021 NAR publication, “Case Studies on Repurposing Hotels/Motels into Multifamily Housing.”

The case study focuses on our partnership with co-sponsor Vivo Living on the conversion of Winston-Salem Residence Inn into Vivo Apartments. Visit www.nar.realtor.com to read more, or download the full report here

1 Flaherty, Anne, and Arielle Mitropoulos. “CDC to Loosen Mask Guidance as Early as next Week as COVID Case Numbers Drop.” ABC News, ABC News Network, https://abcnews.go.com/Politics/cdc-loosen-mask-guidance-early-week-covid-case/story?id=82929192.

2 Krishnan, Vik, et al. “Hospitality and Covid-19: How Long until ‘No Vacancy’ for Us Hotels?” McKinsey & Company, 5 Nov. 2020, https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/hospitality-and-covid-19-how-long-until-no-vacancy-for-us-hotels.

3 Coleman, Andrew. “Checking in on Multifamily Conversions.” Berkadia, 2 Sept. 2021, https://base.berkadia.com/blog/multifamily-conversions-hotel-industry.

4 ”Airbnb Surpasses Pre-Pandemic Levels.” BostonGlobe.com, The Boston Globe, 17 Feb. 2022, https://www.bostonglobe.com/2022/02/16/business/airbnb-surpasses-prepandemic-levels.

5 Cororaton, Scholastica (Gay). “Conversion of Vacant Hotels/Motels Can Help Alleviate Shortage of Affordable Multifamily Housing.” National Association of REALTORS®, 14 May 2021, https://www.nar.realtor/blogs/economists-outlook/conversion-of-vacant-hotels/motels-can-help-alleviate-shortage-of-affordable-multifamily-housing.

6 Lovinger, Joe. “Single-Family Rents Grew More than 5% in Past Year.” The Real Deal New York, 16 June 2021, https://therealdeal.com/2021/06/16/single-family-rent-growth-more-than-doubles-in-april/.

7 Papp, Timea-Erika. “Why Hotel Conversions Work as a Long-Term Housing Solution.” Multifamily Real Estate News, Multifamily Real Estate News, 27 Oct. 2021, https://www.multihousingnews.com/why-hotel-conversions-work-as-a-long-term-housing-solution/.

About Fairway America

Fairway America is a leading alternative investments manager focused on middle market commercial real estate. Established in 1992, the company specialize in real estate credit and private equity strategies on behalf of individual and institutional investors. As of Q1 2022, the firm manages more than $315 million of investor capital and a portfolio of assets representing more than $2.2 billion in gross asset value across several major property types. For additional information, visit www.fairwayamerica.com.

More from Fairway America

What are single asset syndications?

What are single asset syndications?

A syndication can be defined as a group of investors who collectively hold a single asset. This could be as LP and GP members of an equity investment LLC, or as Co-Lenders who pool their money and make a single loan to a borrower. In either case, they are considered a...

What are Open-End Funds?

What are Open-End Funds?

Investment Period: Open-end funds are set up as legal entities that are constantly raising new capital from investors and continuously deploying that capital into new investment. Open-end funds generally do not have a set fundraise time horizon. Capital Call:...

What are Closed-End Funds?

What are Closed-End Funds?

Investment Period: Closed-end funds are set up as a vehicle that has a defined capital raising period, a defined investing period, and a defined harvesting period. During the capital raising period the fund manager is seeking capital commitments from investors, which...