Tower Capital recently arranged a $12 million acquisition and renovation loan for a 158-key, four-story, interior corridor, Best Western Plus hotel that will be repurposed to a 113-unit, B-Class, multifamily community. The project was originally built in 1986 and underwent a major PIP in 2013. The property features a business center, fitness center, and outdoor pool and is just minutes from Arizona Mills Mall Shopping Center, Arizona State University, Tempe Town Lake, the Phoenix Sky Harbor International Airport and many other area amenities.

The sponsor projects completing construction and converting all the units over a 15-month time period, while leasing is scheduled to begin as soon as month 7.  The unit mix will consist of forty-seven studio units and sixty-six one-bedroom, one-bath units. Renovations will include the addition of kitchens as well as cosmetic improvements such as paint, fixtures, and countertops.  Some units on the ground floor will include the addition of patios.

The non-recourse loan provides the borrower with a 36-month term plus an additional 12-month extension option. Out of the $12 million in proceeds, $3.6 million will be held back for capital improvements and $800,000 for interest reserve.

Low cost housing is becoming increasingly difficult to find near Tempe’s city core, and more renters seeking these modestly priced units are being pushed from the core southward, towards the subject property. The high demand for this segment is apparent in the low vacancy rate in the trade area. The projected rents are below subsidized rent standards and should be popular as an affordable option.