Owners of the Hilton Hartford are considering a partial conversion to apartments following the failure of a potential buyer to emerge at an auction last year. Courtesy image
The COVID-induced downturn in hotel business is starting to pay unanticipated dividends for multifamily housing production in Connecticut as developers move ahead with conversion projects.
Developers recently received approval from local officials to build 335 apartments at a pair of hotel properties in Farmington and Manchester. And owners of the 392-room Hilton Hartford, the capital city’s largest hotel, have had preliminary talks with the Capital Region Development Authority about seeking financing for a partial conversion to apartments.
“We are having a conversation about playing a role in the capital improvements to the Hilton,” said Michael Freimuth, executive director of the CRDA.
The partial multifamily conversion of the Trumbull Street property is one of two options that have been floated between the economic development agency and owners Waterford Hotel Group, Freimuth said. Another option is renovations accompanied by a change of brand.
The hotel, located next to the XL Center, went to auction in November 2020 but failed to attract any potential buyers.
Looking for a path forward, owners are now considering a strategy already underway at hundreds of hotel properties across the U.S.: conversion to permanent housing. A May study by the National Association of Realtors tracked 187 hotel conversions by its members, nearly two-thirds of which would be converted into multifamily uses including apartments, senior housing, assisted living and student housing.
$40K Per Unit
Developers are betting that the upfront capital investment on building renovations will be offset by increased revenues from future apartment tenants.
“It makes sense,” said Laura Crosskey, president of Hartford-based Crosskey Architects. “Usually you’re dealing with roughly the same amount of bathrooms and sometimes kitchenettes. Depending upon the hotel rooms, you can keep them as studios or microunits, or you can combine the hotel rooms into one-bedroom apartments.”
Freimuth estimates that the cost to convert each hotel room into an apartment would be $40,000, based upon projects completed before the pandemic such as conversion of the former Hotel Sonesta in Constitution Plaza into 193 apartments. CRDA assistance to the Hilton would take place in the form of loans, although no applications have yet been filed with the agency.
“You’re combining hotel rooms to make one apartment and get some efficiencies,” Freimuth said. “You’ve got most of your infrastructure in place such as elevators, HVAC systems and plumbing. The basic conversion allows you to convert a bathroom to a kitchen, keep the other bathroom and remove the wall between the two units.”
Waterford Hotel Group could not be reached for comment.
In June, a partnership of Shelbourne Global Solutions and Waterbury-based Axela Group acquired the former Red Lion Hotel in Hartford’s Downtown North for $22 million and announced plans for an additional 164-unit residential conversion. The 50 Morgan St. property was partially converted into 96 apartments by the previous owner before it went into foreclosure early this year.
Developers also have a fallback plan with such conversion projects, Freimuth noted: apartments can be easily switched back into extended-stay suites if the hotel market outperforms multifamily properties.
Suburban Hotels Add Housing
Developers are finding opportunities at troubled hotel properties in Hartford suburbs for multifamily housing production as well.
In Manchester, the planning and zoning commission approved plans in July by New Haven-based Paredim Partners to build up to 110 apartments at the Hawthorn Suites by Wyndham hotel.
And in Farmington, officials approved a zone change that will enable developer CLP Farmington to remodel the former Hartford Marriott Farmington hotel into 225 apartments.
According to the NAR report, 82 percent of recent hotel-to-housing conversions have taken place in suburban and rural areas, and nearly two-thirds of the projects involved a limited-service hotel. The majority of properties were acquired for below $50,000 per room. A majority of the conversions cost less than $25,000 per room, NAR reported.
