Located in U.S. markets with strong housing demand, the nine extended-stay hotels are poised for conversion into multifamily assets.
To date, through the PEG Extended Stay Conversion Fund, L.P., PEG Companies has acquired 15 extended stay hotels for the conversion into multifamily communities called AVIA apartments.
PROVO, Utah – May 11, 2022 – (Newswire.com)
As part of a resourceful value-add investment strategy that leverages cap rate arbitrage and the operator’s strengths, PEG Companies [PEG], vertically integrated real estate development and investment firm known for its unique approach to creating value, acquired a nine-property portfolio of hotels across select U.S. markets. PEG anticipates operating each of the properties as hotels and ultimately converting them into quality Class B multifamily communities when the highest and best use of the property is no longer as a hotel.
The nine hotels, built between 1984 and 1997, stand in Boston, MA; Vancouver, WA; Dallas, TX; Atlanta, GA; Jacksonville, FL; Philadelphia, PA; Ann Arbor, MI; Princeton, NJ; and Ocean City, NJ. With the majority of them originally built as Residence Inn by Marriott extended stay hotels, the properties lend themselves to efficient and cost-effective conversions.
“Because by nature, most extended stay hotels already possess the critical features for comfortable apartment living—private entrances, full kitchens, convenient amenity packages—these types of acquisitions are ideal for our hotel-to-apartment conversion process,” explained Alex Murphy, Vice President and Portfolio Manager over the strategy.
To date, through the PEG Extended Stay Conversion Fund, L.P., PEG has acquired 15 extended stay hotels (including these nine hotels) and is currently finishing out a $130 million fundraise for the closed-end commingled real estate investment fund focusing on the strategy. While each property has its own unique timeline following the acquisition, the assets in this last portfolio will generally continue to operate as cash-flowing hotels until multifamily entitlements are secured and construction teams are deployed. At that point, the conversion process—which includes mostly cosmetic updates—will take place, during which properties may continue to operate at reduced capacities. Once complete, the converted properties undergo a rebranding process under the ‘AVIA Apartments’ name, a multifamily brand PEG launched in 2020 specifically for its extended stay conversion strategy.
“Extended stay hotels present a unique opportunity to buy a business that is valued off hospitality performance and convert it into stable multifamily apartments which are less risky and valued at lower cap rates. Because of this arbitrage, we can make significant investments into the properties while maintaining rents attainable for the middle class,” Murphy said.
PEG is uniquely qualified to execute the strategy entirely in-house. From re-entitling the properties through PEG’s investment and development teams to the physical conversion of the structures through PEG’s construction group, all the way through to leasing and operating the properties (as both hotels and multifamily communities) through PEG’s property management teams, PEG is positioned to successfully bring the conversions to fruition, and in turn, fill a major need in the properties’ respective markets.
“With a staggering percentage of renters across the United States now considered cost burdened, we are excited to be able to offer real solutions to communities by breathing new life into these aging hotels and repurposing them into meaningful assets that will improve people’s lives today and into the future,” said Soren Halladay, Chief Investment Officer at PEG.
Media Contact: Ali Monsen l 801.783.7334 I [email protected]
About PEG Companies [PEG]:
Founded in 2003, PEG Companies [“PEG”] is a full-service commercial real estate development and investment firm known for its unique approach to creating value. A vertically integrated organization with five highly synergistic companies that each manage a different aspect of PEG’s investments, the group is known for its hands-on involvement through the entire investment process. From sourcing deals to the development and construction of projects, all the way through to operating the assets and ultimate disposal, PEG’s diverse and experienced team executes each investment strategy with precision, creating the premier real estate experience. With $1.4 billion AUM diversified across the multifamily, student housing, mixed-use, retail, industrial, and hospitality asset classes throughout 20-plus states/provinces, the firm sponsors multiple investment products on behalf of its investors. For more information on PEG, visit pegcompanies.com.
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