PEG Companies [PEG], a leading commercial real estate investment firm known for its unique approach to creating value, has acquired its 14th extended stay hotel for conversion into quality Class B apartments. The Habitat Suites Austin joins PEG Companies’ growing portfolio of hotel-converted-to-apartments across the country.
Ideally located at 500 E Highland Mall Boulevard, the property is currently undergoing renovations and remains on track for an early summer delivery. PEG is in the process of adding a fitness center, workspace areas, cosmetic improvements, and other updates necessary to convert the property into a market-leading multifamily community while leasing out one building of furnished units on their current state.
The acquisition of Habitat Suites is the latest of many extended-stay acquisitions for PEG. The firm is currently raising a $150 million fund, the PEG Extended Stay Conversion Fund, L.P., dedicated specifically to their strategy of converting discounted extended-stay hotels into quality Class B workforce housing in strong markets across the United States. This Austin location has become the third acquisition within the new fund, following in the footsteps of an earlier fund which has 11 extended stay hotel acquisitions.
As the hospitality industry experienced the heavy burden of COVID-19 impacts last year, real estate groups across the country recognized the value in PEG’s extended-stay conversion strategy and started to follow suit. When asked about how this increased focus from other groups may be impacting PEG’s strategy, Cameron Gunter, Chief Executive Officer of PEG explained:
“We are seeing more groups out there bidding for the older extended-stay hotels. What we are finding is that being new to the game, these other groups are not thinking through the implications of certain purchases. We have been at this since 2018, and we are very selective in which hotels we acquire. We are confident that by remaining disciplined in our approach, we will build a strong portfolio of Class B multifamily housing units across the country and continue to stand out as the leader in this space.”
When vetting potential acquisitions, PEG has several criteria on its list including urban and suburban-urban sub-market locations with strong rental occupancies, ongoing projected growth metrics in the area, and recent sales of comparable Class B multifamily units. The population within a three-mile radius of Habitat Suites and the adjacent Highland Mall is projected to grow 10.33 percent within the next five years. In addition, the greater Austin community continues to make progress on redeveloping the mall into 1.3M square feet of Austin Community College campus space; 800,000 square feet of office space; 150,000 square feet of retail space; new outdoor trails; several new parks; and 1,200 Class A apartments.
PEG investment executives say that, once converted into a multifamily community, the new use will help satisfy the growing demand for attainable housing in the Austin area.
“Like so many communities across the country, Austin is in dire need of reasonably priced housing for the working class,” explained Soren Halladay, Chief Investment Officer at PEG. “We are excited to give this property a bit of tender love and care in order to transform it better than before and, in the process, offer people an inviting, stylish place to call ‘home.'”