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Magic Castle was one of five W192 motels being eyed for residential conversion to workforce housing

The purple Magic Castle motel on U.S. 192 in Kissimmee, the setting of "The Florida Project" movie, was being eyed for a residential conversion.
The purple Magic Castle motel on U.S. 192 in Kissimmee, the setting of "The Florida Project" movie, was being eyed for a residential conversion. (Marc Schmidt / A24)

A purple motel that became a worldwide symbol for Orlando’s working poor as the setting for “The Florida Project” movie was the latest to be targeted as a workforce housing conversion on Kissimmee’s W192 corridor.

Mark Vengroff, managing partner of One-Stop Housing, met with Osceola County’s Development Review Committee this week to discuss the potential conversion of Magic Castle Inn & Suites at 5055 W. Irlo Bronson Memorial Highway. Vengroff and his team led the redevelopment of Kissimmee’s Backlot Apartment and Colonial Gardens in Orlando into workforce housing.

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Vengroff told GrowthSpotter on Friday he canceled his purchase contract for the 107-room motel after the pre-application meeting.

“The impact fees and requirements are so excessive, it makes it impossible to do workforce housing and make it pencil out,” he said. “The killer for us was having to create 10,000 square feet of recreational space. We could build it, but we couldn’t keep it affordable.”

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He said even if he got credit for the existing swimming pool, he would have to either lose parking or sacrifice rental units to make up the difference. He backed out of the deal even before learning the Osceola County School Board had decided not to reduce school impact fees for studio apartments, but that only reinforced his decision.

“Someone will buy the Magic Castle and knock it down to do market rate, but that’s not solving the (affordable housing) problem,” he said.

Vengroff also was planning to bid on the 3-motel portfolio on Lake Cecile that goes up for auction on Sept. 1. The Lake Cecile Inn & Suites, Palm Lakefront Resort & Hostel, and Star Motel at Lakeside are being sold as part of a bankruptcy case. Two of the properties were condemned by Osceola County, and the county has already issued demolition permits for them.

This is the view of the three Lake Cecile motels looking north, toward the Embassy Suites and Storey Lake Resort.
This is the view of the three Lake Cecile motels looking north, toward the Embassy Suites and Storey Lake Resort. (Fisher Auction Company)

Tara Tedrow, shareholder with Lowndes, told planners One-Stop was looking to implement its conversion model and renovate the hotels for affordable workforce housing. She wanted to know if the company acquired the property and agreed to bring the buildings up to code, could the demolition order be lifted, but the staff said it was unlikely.

“What my understanding is that, you probably need to follow up on all of this, but that the judge has ordered that no, he would not allow that. But it would have to be that they would have to be demolished and redeveloped,” DRC Chairman Jose Gomez said.

Fisher Auction Company is marketing the properties as a 17.9-acre site in the heart of the tourism corridor that is “prime for redevelopment.” It’s across U.S. 192 from Storey Lake Resort, one of Lennar Homes’ top-selling resort communities. A new $32 million wellness-themed condo hotel is going to be built right across the street.

Vengroff withdrew his auction registration, saying his plan for the property isn’t what the county is looking for at that location. “Some cities and counties are very welcoming and understand what’s required, and some counties just don’t get it,” he said.

He’s not the only developer to abandon plans for large-scale motel conversions this week. Sal Smeke, co-founder of CSC-Coliving, told GrowthSpotter the school board’s latest reversal on impact fees would be a deal-breaker for his plan to convert the 960-room Orlando Sun Resort at I-4 and U.S. 192 into studio apartments.

“It’s already a difficult project, and now you’re talking about nearly $12 million in school impact fees,” he said. “This will kill it.”

Have a tip about Central Florida development? Contact me at lkinsler@GrowthSpotter.com or (407) 420-6261, or tweet me at @byLauraKinsler. Follow GrowthSpotter on FacebookTwitter and LinkedIn.

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