(Image: Hilton)
The end of business travel as we know it means the “highest and best use” of an extended stay hotel at the base of Capitol Hill above downtown Seattle will be as an overhauled apartment building.
PEG Companies, a Provo, Utah-based “vertically integrated real estate development and investment firm known for its unique approach to creating value,” has acquired the Homewood Suites by Hilton building on Pike near the Seattle Convention Center for $60 million with plans to convert the eight-story extended stay hotel into a new AVIA Apartments building, CHS has learned.
King County records and Seattle construction permits reveal the June acquisition of the 1991-built hotel and plan for the company that has made acquiring large extended stay buildings a core of its strategy.
“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,” Alex Murphy, a vice president at PEG said in a press release earlier this year.
Early paperwork filed with the city shows a plan to convert the 195 extended stay units to apartments including work on “exterior facade modifications and interior upgrades.” The company says the process “includes mostly cosmetic updates” and that it continues to operate “cash-flowing hotels” at some of the properties it has acquired during the construction work. 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,” the company says.
The building also has a 120-vehicle underground parking garage.
(Image: Hilton)
Prior to the pandemic, the pendulum appeared to be swaying with developers pursuing hotel and lodging projects or mixing in lodging elements in buildings being planned around Capitol Hill. But instead of being a new direction, most of those appear to have been more experiment than trend and the apartment market around the central city continues to be coveted by investors.
Located at Pike and Boren, the “Homewood Suites By Hilton – Capitol Hill” property was previously held by the Chesapeake Lodging real estate investment trust which acquired the building in 2011 for $52 million.
Eleven years later, the foundations of the extended stay industry have been hugely altered and the financial opportunity hugely dented by the impacts of the COVID-19 pandemic on business-related travel. Meanwhile, rents have continued to climb — especially in cities like Seattle where housing is relatively scarce and a multitude of factors from the economy to the environment continue to align to make the area a desirable place to live.
(Image: Hilton)
PEG is hoping to cash in. “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,” PEG chief investment officer Soren Halladay said in the company’s press release on the acquisition of nine hotels across the United States earlier this year.
The move to convert the Pike hotel comes as Seattle pushes forward on the $1.9 billion expansion of its convention center just blocks from the about to be converted building. The massive expansion project, already hit by economic uncertainty in its late construction phases as the pandemic took hold, faces an even more uncertain future amid enormous questions about the convention and business travel industries. The new expansion is expected to debut in January 2023.
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Don’t they always sound so altruistic while charging the most that traffic will bear. I continually question what citizen profile this burg is striving for.
They have to charge enough to cover their loan interest costs and management costs. The property taxes also get effectively passed thru into the rental prices.
We need to look to Singapore’s housing model. It’s the only public housing model in the world that seems to produce high quality housing that actually encourages wealth generation by the tenants because the housing is purchased (at a subsidized price) over time by the tenant. Other systems in the US or in Europe seem to produce pretty nasty outcomes.
“The property taxes also get effectively passed thru into the rental prices.”
That’s not true. Housing has a very upward sloping supply curve and the rent is determined pretty much by what renters are wiling to pay.
So when king county raises property taxes the landlords don’t pass the cost thru to renters?
How can they? If the tenant would pay that amount wouldn’t they already be charhing that month? We’re they just being nice before?
Waaaa, we need more housing… waaaa it costs too much waaa can’t please anyone…waaa
The convention center expansion.
Why?
I used to be in the trade show business, so I know a thing or two about this. Most of the people at trade shows are from out of town, out of state. Comicon is an exception. In the early 2000s, it was estimated that ten percent of all air travel was in one way or another trade-show related…believe me, there is a trade show for EVERYTHING, every profession, trade group, or interest, no matter how specific or arcane. This Convention Center expansion wasn’t asked for by anyone I know, it is not for anyone that I know, and it is squarely at odds with Seattle’s stated goal of becoming carbon neutral. Air travel is notoriously carbon intensive. The expansion is funded by floating bonds and a tax on hotel beds. The tax collects money from mostly out-of-towners into a fund that becomes massive, waiting for the Port of Seattle to use it in a carbon intensive mega project…and nobody else gets to lay their hands on it.
Or question the why of it.
This is an ironclad funding source that never seems to come up for re-evaluation. Could this money be put to better use elsewhere? Is this system regressive? Can this huge pot of money be put to a use that will keep Seattle on the path to being carbon neutral? When do the people of Seattle ever get a say? Where is the VETO power on expansions like this? I feel the process that led to the expansion of the Seattle Convention Center is gravely undemocratic and unaccountable.
I could make a similar argument about expanding the cruise ship terminals.
Most cruise ships do not use shore power; they burn a tar-like unrefined petroleum called ‘bunker fuel’. When burned, bunker fuel emits tons of sulfur and nasty particulates in its exhaust smoke, which the prevailing winds carry to SODO/Georgetown, giving it Seattle’s worst air quality. Why are we expanding these sytems while we supposedly pursue a goal of being carbon neutral? At the very least, we should expand these systems on our own terms, with carbon offsets, or making it clear to cruise ship companies that if they want to vist our jewel of a city, they need to first clean up their act. Seattle’s present system of self-defeating attempts at being carbon neutral looks alot to me like ‘greenwashing’.
I don’t understand the convention center expansion. It seems so 1990s but thanks Ed Murray I guess. If it is disappointing financial-wise maybe turn it into housing for the homeless?
We’re not trying to become carbon neutral. We’re pretending since it gets people to vote for candidates and ballot issues.
As you’re saying, actions speak louder than words.
So, basically you want to kill the cruise business in Seattle and limit or eliminate conventions and trade shows while defaulting on the debr associated with the Convention Center expansion. Sounds like a great recipe for damaging our local economy.
^^This is what is known as the “Black or White Fallacy”, AKA the ‘All or nothing Fallacy”. There are many shades of gray between questioning the convention center expansion and “killing all the cruise business’. It is popularly known in that downtown Seattle there are at least 50 shades of gray. Seattle will still have a white hot economy with a little less convention business, and airlines will still make money if there were a few fewer flights in and out of Seattle. Maybe the airlines would cancel fewer flights! Hookers and fancy restaurants will still have business with fewer covention visitors to Seattle, and Pike Place shops will still sell T-shirts and fudge. Enabling a periodic discussion of how we use funds supposedly generated in the public interest is a far cry from ‘killing business’.
Unfortunately the time to question the merit of the convention center expansion has long past. While Glenn was being a little melodramatic his point regarding the bonds still holds. Those tax revenues are now spoken for and can’t be undone without paying off the bonds. Trying to do so now would surely bankrupt the city. You could pause construction I suppose and just let it sit there as unused land but you are still going to be paying the construction cost vis a vis the bonds.
I rarely disagree with you, Glenn, but in this case I am on the side of those who oppose the Convention Center expansion. The reason it’s being done is to attract the mega-conventions, instead of simply the large conventions which we have been satisfied with in the past. Must we always “build bigger”?
The EIS for the convention center expansion dismissed such concerns about air travel carbon, claiming that it was impossible to determine the carbon footprint because the issue was too complex. Instead the focus was on local effects: bus routes, the building itself, etc., of probably vastly less impact.
See https://kuow.org/stories/convention-center-getting-bigger-so-its-carbon-footprint/