Miami Hotel-to-Multifamily Conversion Secures Financing

Harbor Group International is providing $27.5 million to a hotel-to-multifamily conversion project in the Coconut Grove neighborhood of Miami. The borrower is AB Asset Management, which used the funding to acquire and redevelop the property into a Class A multifamily community. The project is expected to be completed in September 2022.

In mid-March, AB Asset Management acquired the Residence Inn Coconut Grove from Hersha Hospitality Trust for $31 million. Avison Young brokered the sale of the three-building, 140-unit hotel.

Over the past few years, Coconut Grove has experienced a surge of new commercial, office and retail developments, which should re-energize the neighborhood’s shops, cafes, and restaurants.

The property sits at the entry point of the Grove’s business district, which features 360,000 square feet of Class A office space. It is directly on the Miami Trolley line, which provides access to employment and entertainment centers such as Downtown Miami, Coral Gables, the Performing Arts District and Midtown Miami.

Avison Young Principal John K. Crotty said Avison Young received double-digit offers on the property, which is only a few minutes from shopping, dining venues and multiple parks overlooking Biscayne Bay.

“We were not surprised by the interest on the property mainly due to location and the fact that it is walking distance to major retailers and new development,” Crotty said. 

The asset sits in a neighborhood that has been a destination for high-end condominium use, with recent high-rise developments Park Grove, Grove at Grand Bay, and Mr. C Residences. Still, HGI says that The Grove only has a total multifamily rental inventory of just 1,870 apartments and no new projects under construction.

There are no Class A multifamily developments in the business district, according to HGI. This deal falls within HGI’s multifamily whole loan platform, which began originating and closing loans in 2020.

In another recent hotel-to-apartment transaction, a newly formed partnership between affiliates of Blaze Partners and Argosy Real Estate Partners acquired a nationally branded extended stay hotel in Charlotte with plans to convert it to a market-rate apartment community. 

Jonathan Needell, president and chief investment officer of KIMC, told GlobeSt.com that hotel concepts on the lower end of the quality scale but in good locations are ripe for conversions. Particularly because right now, some of those hospitality assets are facing occupancy issues. 

“Now, they’re 20% occupied and have started to be turned into higher and better use deals,” Needell told GlobeSt.com in the earlier interview. “We see several of those, and that’s an emerging trend.”