Some Florida Hotels Are Making a Comeback as Workforce Housing

T2 Capital Management is finding an opportunity to convert shuttered hotels into workforce housing. The firm has already completed the conversion of one hotel into a workforce apartment complex in Kissimmee, Florida, and it is now working on a second conversion just a mile away.

“We are mindful of the location and the demand drivers in the surrounding area,” Jeff Brown, co-founder and CEO at T2 Capital Management, tells GlobeSt.com. “We have a desire at T2 to be helpful in the workforce housing space and to alleviate the shortage of price-point sensitive housing. We want to be part of the solution in that market, and that led us to do our first project in 2019.”

The firm has acquired the six-story, three-building Baymont Hotel to build a 254-unit apartment complex that will lease for $930 per month. The property is located near Disney World, and T2 plans to build the property to attract park workers. CrowdStreet provided the equity for the project through a capital raise with a pool of 184 investors. “The owner of the Baymont Hotel reached out to us and asked if we would be interested in doing a similar hotel conversion project as COVID had set in,” says Brown. “The location near the earlier conversion project and being nearby Disney, which is the largest non-government employer in the United States, made this a unique opportunity.”

Florida has been one of the top states for population growth during the pandemic, a trend that has exacerbated the already limited supply of affordable housing. “The demand for workforce housing existed in the market before COVID, but it wasn’t as pronounced,” says Brown. “The demand is only being accelerated with the migration south to Florida.”

At the same time, the dislocation in the hotel market created redevelopment opportunities for housing that were not available prior to the pandemic. “The available supply of hotels for conversion has increased,” says Brown. “I am confident in saying that the hotel owner would not have reached out to us if his hotel was not sitting dormant because of COVID. They opportunity was certainly amplified due to COVID.”

There was a limited window for these conversion projects, and it has likely already past. As travel restrictions end and businesses reopen, hotel owners are less incentivized to sell. “Hotels have come roaring back, and owners that might have been open to a workforce housing repositioning six months ago might not be today,” says Brown.

While T2 has started in Florida, it plans to develop affordable housing in markets throughout the US. “The affordable housing shortage is a nationwide issue, and we have significant plans to help eradicate this affordable housing shortage across the country,” says Brown. “Getting well beyond Florida is the intention.” The firm will target markets with strong population growth and an abundance of service professionals to occupy the affordable units. Or, as Brown puts it, “Markets where demand is strong and supply is limited.”