Capitalizing on Adaptive Reuse During the Pandemic
During the summer of 2020 when much of the United States and the world had come to a near standstill amid the COVID-19 pandemic, real estate developer The Estate Companies was on the hunt for distressed property deals and turned to Holland & Knight's experienced real estate and land use attorneys for guidance.
Holland & Knight had created a niche team to assist clients during the global crisis, assembling highly knowledgeable and innovative attorneys to form the Hotel Conversion and Alternate Use During COVID-19 Practice. The dedicated multidisciplinary group predicted that the historic COVID-created economic freeze would create a market ripe for distressed real estate deals, especially in the hospitality sector. Real estate attorneys Alejandro Arias and Hugo Arza immediately went to work and promptly identified an opportunity for The Estate Companies, one of South Florida's largest multifamily developers – a shuttered Ramada Inn at 1950 W. 49th St. in Hialeah, Florida.
Their comprehensive representation took on a multipronged approach, as detailed below.
- Determining deal potential. The 258-room hotel covering five acres was built in 1970. It was badly damaged during Hurricane Irma in 2017 and remained in a state of disrepair ever since. The financial strain of the hospitality nosedive created by the pandemic motivated the California-based owners to dispose of the property. The Holland & Knight alternate use team performed due diligence and provided best case investment scenarios to help guide and advise The Estate Companies as to the potential adaptive reuse opportunities for the property. Once the best options were realized, the developer closed on the hotel in August 2020, paying $15.25 million.
- Ensuring adherence to local requirements. After the closing, the team presented the preliminary vision of the project to city staff and worked with the project design professionals to ensure the final site plan adhered to Hialeah's Neighborhood Business District (NBD) zoning regulations. The NBD targets a mix of residential, retail, office and/or self-service-oriented uses that provide access to and encourage regular use by pedestrians.
- Navigating zoning regulations. To meet those requirements, The Estate Companies sought a special use permit to convert the hotel building and repurpose the existing building envelope into a mixed-use project of 251 multifamily units, of which 90 percent were studios ranging from 340 to 599 square feet and 10 percent were one-bedroom units starting at 600 square feet. The project also included a 5,500-square-foot retail component and a 2,036-square-foot outparcel restaurant fronting on West 49th Street, a significant commercial corridor for Hialeah. Additionally, the proposal outlined a 123-space parking garage to increase on-site parking to 500 spaces, a signature entrance plaza and lobby, pedestrian walkways and luxury amenities, including a fitness center, pool, cabanas and grilling stations.
- Obtaining necessary approvals. Armed with the city staff's favorable recommendation, Mr. Arias represented The Estate Companies during the public hearing process before the Hialeah Planning & Zoning Board and City Council in connection with the special use permit request and a number of non-use variance requests. He obtained the approvals for all required land use entitlements.
- Ongoing representation. The project beautifies a blighted and deteriorating site located at a key gateway into the city and provides housing for employees of the surrounding industrial and commercial complex. It serves as a model of how to successfully apply the adaptive reuse and repositioning of a distressed hospitality site. The Holland & Knight land use attorneys provide continued representation through completion of the project.
This successful adaptive reuse serves as a prime example of the opportunities created because of the historic distress caused by the COVID-19 pandemic and the scarcity of raw land in South Florida. Distressed investors have amassed significant funds to take advantage of the opportunities that present themselves in the hospitality sector.
As a result of their representation of The Estate Companies, Mr. Arias and Mr. Arza have received a number of inquiries related to the repurposing prospects of struggling hotels into alternative uses, including multifamily, mixed-use, student housing and senior-living products. As the South Florida market continues to attract businesses and people from across the country, the momentum for these redevelopment opportunities continues to increase.
About the Hotel Conversion and Alternate Use During COVID-19 Practice: To assist our clients in their efforts through the complicated process of repurposing a hotel asset on a temporary or permanent basis, Holland & Knight has created a Hotel Conversion and Alternate Use Team composed of attorneys and professionals with broad experience in acquisition and disposition, land use and entitlements and development across all real estate asset classes. Our lawyers can guide you through all aspects of the transition of your hotel property, from land use and zoning permits to financing, insurance and other key steps.