Less than a year ago, Chicago-based T2 Capital Management and its development partners went out on limb with the $17.7 million acquisition of Kissimmee’s Red Lion Hotel with ambitious plans to convert it to a mixed-use residential project.
Last weekend, T2 Founder and CEO Jeff Brown was in Kissimmee to welcome the first new residents as they moved into their newly delivered apartments at Maingate Village on the W192 tourism corridor.
“We’ve done really well at Maingate with the enthusiasm around delivering quality affordable rental units,” Brown told GrowthSpotter.
T2, along with its joint venture partners, Orlando-based Cornerstone Property and Miami-based ICM Development, will complete the residential conversion of the former 550-room hotel in phases. The completed project will offer 355 studio, one-bedroom and two-bedroom apartments. The first 130 units will be completed this month with rents ranging from $815 to $1,395.
The amenities, including a fitness center and mail room with locker system, should be finished by the end of the year. The balance of the apartments will be completed by spring 2020.
Only the planned commercial and retail space remains in question. In the original concept, the developer planned to convert 28,000 square feet of common space and meeting rooms from the hotel into commercial and office uses.
“As COVID has played out and we’ve watched what’s going on with the market, it’s hard to rationalize any retail at Maingate,” Brown said. He told GrowthSpotter he’d like to try to get a few more residential units out of the space.
The demand for affordable workforce housing in Kissimmee has been so high T2 already purchased a second hotel on the tourism corridor for its next conversion.
The company paid $15.6 million in October for the former Baymont Inn Celebration at 7601 Black Lake Rd.
“It will be similar to Maingate. The hotel had 295 rooms, and we’ll deliver about 250 multifamily units,” Brown said. “We’ll combine a few rooms to create some larger units, but largely the walls and room dimensions will remain intact.”
The developers already secured Tourist Commercial zoning and will file a site development plan for the change of use. Brown said the total project budget is estimated at $25 million, which includes about $2.8 million just for school impact fees.
The renovations will be substantial, but still less costly than Maingate because the building is newer. “The condition of Baymont is excellent," Brown said. “It was built in the early 1990s and a new roof was put on a year ago."
They plan to start construction in early 2021 and complete it in about 10 months. Most of the work is cosmetic, but every surface will be refreshed.
“A lot of the heavy lifting is already done,” Brown said. “That said, it’s still a gut rehab. We will take each unit down to the studs and install new flooring, cabinets, kitchens and bathrooms.”
Brown said T2 and development partner, Carlos Balzola, still have a third vacant hotel property under control on the corridor They rezoned the former Rodeway Inn at 5995 W. Irlo Bronson Memorial Highway to allow for the residential conversion.
“It’s a failed condo hotel,” Brown said. “We control the property.” Construction is on hold for now because the developers don’t want to flood the market next year as they stagger the openings of Maingate Village and Baymont.
Kissimmee’s aging hotel inventory was already being targeted for residential conversions before COVID hit, but now owners are desperate to sell as the tourism economy collapses. And now timeshare resorts are also getting into the game. Last month, Osceola County staff met with developers planning conversions for the Saratoga Resort and the Festiva Orlando Resort.