By Roland Murphy for AZBEX
Arizona Housing, Inc. is seeking a rezoning from the City of Phoenix to convert a former hotel property at 2900 E. Van Buren St. into a 66-unit affordable multifamily development.
The 1.61-acre site near 30th Street and Van Buren is surrounded by a church, a motel, an auto sales lot, a live adult entertainment venue and vacant land and lies within a mile of the 24th Street / Washington Street / Jefferson Street light rail stations. Consequently, the request falls under the Walkable Urban Code Transect 5:3 District, Transit Gateway Character Area zoning. This portion of Van Buren is envisioned to have a high degree of walkable and bikeable street level activity.
The existing building will undergo adaptive reuse into apartments, and a new four-story apartment building will also be built on a vacant portion of the site. The City staff report finds the multifamily use consistent with the site’s designation.
Staff also reports the Gateway Transit Oriented Development District says the site is a suitable location for an adaptive reuse and retrofitting project, and that that portion of Van Buren is suited for a mix of compatible uses, such as retail and restaurant, which a residential use would support.
“The Gateway TOD Policy Plan envisions that in the year 2040, the motels along Van Buren Street have been revitalized and draw on Van Buren’s history to restore a positive character and rich sense of place,” the report says. “The Van Buren Corridor portion of the plan for 2040 identifies the adaptive reuse of old motels on Van Buren Street as potential catalyst projects, stating that ‘the numerous vintage motels that once defined the character of the street may be rehabilitated as affordable housing for seniors, artists or innovative co-housing communities. This combined with additional mixed uses in the form of restaurants, retail and office space, has the potential to bring new life back to the once-thriving thoroughfare.’”
Developer AHI plans to use Low Income Housing Tax Credits for the development.
The staff report finds the proposal to be consistent with the General Plan and the Gateway TOD policy.
According to the submitted site plan, the property owner is Mani Hotels LLC. Arizona Housing Inc. is the developer, and the design firm is Architectural Resource Team, Inc.
Arizona Housing Inc. is a sister organization to Central Arizona Shelter Services. According to the CASS webpage provided by the Valley of the Sun United Way, “In 1996, in response to a need for affordable housing for very low-income persons, CASS formed an affiliated nonprofit corporation named Arizona Housing, Inc. (AHI), a sister organization to CASS, which develops permanent housing for low-income working people. As its first project, AHI created permanent, affordable supportive housing for 60 single men and women ending their homelessness. This efficiency apartment complex, Steele Commons, is a model of permanent, supportive housing for single individuals and is the first of its kind in Maricopa County.”
Conversions a Growing Trend
The adaptive reuse of existing, underused hotel and motel space is becoming increasingly popular with developers across the country. Provided the buildings are structurally sound, it is less expensive to rehabilitate an existing property that already has a floor plan and space segmentation similar to the envisioned final use.
Both with and without LIHTCs in place, a variety of financing options exist for retrofitting hospitality properties to multifamily use. Public-private partnership investment and tax abatement programs offer a unique opportunity in addition to traditional private financing, according to a 2021 publication entitled Case Studies on Repurposing Hotels/Motels into Multifamily Housing issued by The National Association of REALTORS Research Group.
“While commercial lenders provide support across the apartment spectrum,” the report says, “federal programs including LIHTC provide the credits to state governments who in-turn, provide developers with credits to undertake more affordable housing via construction and rehabilitation. The majority of affordable housing in the U.S. takes advantage of LIHTC and other federal tax incentive programs such as the Historic Tax Credit.”
The National Association of REALTORS conducted a member survey as part of its research and found 187 hotel/motel conversion projects. Of those, 60% were for “multifamily housing, workforce housing, housing for veterans, or housing for health care workers.” Senior housing or assisted living projects were another 11%, and 8% were for student housing.
While the conversion process, itself, may be simpler, hotel to apartment conversions run into the same zoning challenges many other multifamily projects face. Given the generally lower monthly rent and potentially longer return on investment, the expense of a protracted zoning fight can make many developers wary.
Conversely, because the property in question is of a more similar and expected use than, for example, a vacant site that has been planned for commercial/retail, rezoning can in many instances be more palatable to residents and approval bodies. The same report says, “Converting from one use to other also entails meeting the requirement for the new, intended use. This can be quite a daunting, expensive and significant task to overcome. One approach is to acquire an extended-stay hotel/motel as they have kitchens or kitchenettes and can be more ‘easily’ converted where some layouts are similar to traditional multifamily arrangements. Simply put, they can have good ‘bones’.”
Several projects in Arizona are part of the repurposing trend. Unfortunately, most of them fall below the $5M threshold for inclusion in the DATABEX project database, so it is impossible for us to assemble a comprehensive list.
Among the projects we can report are:
- Crown Motel in Flagstaff, where Flagstaff Shelter Services is converting a 72KSF motel into 58 affordable housing units;
- The Four Points by Sheraton Phoenix South Mountain Hotel Multifamily Conversion, in which Caliber is converting a 160-room hotel into 100 apartments;
- A conversion by Unified CRE Partners to turn a 1970s-era Embassy Suites on Thomas Road in Phoenix into a 200-unit apartment complex, and
- Sterling Real Estate Partners’ project to turn a 114-room hotel at Scottsdale and Shea in Scottsdale into an 85-unit multifamily development.
Tower Capital also reported arranging a $9.3M acquisition and renovation loan to repurpose a 188-room Quality Inn in Phoenix into 97 Class B apartments.
Several smaller efforts, mostly with an affordable housing focus, have been reported in Phoenix, Chandler and Tempe.
