Nashville Real Estate Developer Hits Home Run Converting Old Hotels To Affordable Housing

The adage that necessity is the mother of invention has proven true on many occasions and Nashville, Tennessee's Channel 5 News has found another example. The "invention" in this case is a real estate developer's formula for successfully converting old hotels into affordable housing units.

It's a winning play that is making money for the developer while filling a glaring need in the real estate industry. ABG Real Estate, headed by Adam Rosenberg, recently converted an old hotel into a 132-unit affordable housing community that will now be known as Wallace Studios. ABG purchased the property in 2023 for $10 million and then took another 10 months to add kitchens and convert the rooms into fully functional apartments.

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Logistically speaking, old hotels are among the most developer-friendly shells for potential conversions to residential units. Since hotel rooms were originally designed as living spaces, they have tenant-friendly infrastructure (large windows, bathrooms in every unit, in-unit heaters) that would have to be added to office buildings or other empty spaces being converted to housing. Not having to add all that in saves developers time and money on the conversion.

New tenants will get a fully furnished apartment for $1,400 per month, including all utilities, security, and access to additional services such as peer counseling. Many Wallace Studios residents will be paying rent with the assistance of vouchers from the U.S. Department of Housing and Urban Development (HUD), which are distributed based on need by government agencies at the city or county level.

Although the sky-high rents in cities like New York, New York, and Los Angeles, California, dominate the conversation when it comes to America's housing affordability crisis, cities like Nashville are not immune. The city has become a popular destination for people moving to escape high rents in other major cities, a factor that has also pushed rents higher than many long-time locals can afford.

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That's especially true for at-risk populations like the elderly, single-parent households, and people with disabilities. According to estimates from a Nashville city government study on affordable housing, Nashville needs to add over 50,000 affordable housing units to meet the city's expected demands by 2030. Rosenberg and ABG have another project set to come online in 2025.

In the meantime, Wallace Studios looks like it's going to be a winner for ABG. If all 132 units rent for $1,400 per month, the property will generate $184,400 per month, which translates to $2,217,600 in annual income. ABG purchased the building for $10 million. If the renovation and conversion cost averaged $37,878 per door, that would be another $5 million.

In that case, the total investment would be $15 million. If Wallace Studios is pulling in $2.2 million per year, there is plenty of room to cover the property's financial obligations and generate passive income for the owners. That's important because the only way more affordable housing stock will be added is if developers believe it's going to be profitable to build affordable housing.

ABG Real Estate and many other developers around the country are showing the vast untapped potential in hotel conversions. They may not solve America's affordable housing problem entirely, but they could certainly be part of the solution. In the meantime, the new tenants at Wallace Studios will be enjoying their freshly renovated apartments.  

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