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Thursday, Sep 29, 2022
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Vivo Looks to Convert ‘Overbuilt’ Hotels Into Apartments

Torrance-based Vivo Investment Group launched in May with the goal of transforming a glut of excess hotel rooms into much-needed apartment units.

“We are a vertically integrated investment and development company that has its sole mission to convert hotels into homes, trying to help solve the affordable housing shortage happening across the U.S.” said Vivo President Dan Norville.

The number of multifamily projects being built is not keeping up with demand, Norville added. At the same time, people are not traveling as much because of Covid-19.

That leaves hotel rooms vacant and allows Vivo, according to Norville, to “kill two birds with one stone. Hotels are in distress. Hotels were overbuilt and oversaturated.”

This isn’t Norville’s first involvement with the hotel industry. In 2012, he founded Norcap Real Estate and Development, an investment firm specializing in hospitality and office assets, as well as the offshoot SiO Hotels, which provides hotel management for the Norcap portfolio.

Vivo works with a general contract partner that spearheads redevelopment. “It helps us control the development and the costs right away,” Norville said.

Because hotel renovations have slowed, the general contractor has more time to help with Vivo’s multifamily conversions.

Norville converted a hotel in Utah to an apartment building with previous companies, but he has not done one under the Vivo name yet.

“It was an interesting test case,” he said.

The Utah project, dubbed the Bigelow Apartments, was formerly SiO Hotels’ Bigelow Hotel & Residences.

Norville said the property was not performing well as a hotel, so he converted it into an apartment building with a burger and beer restaurant on the ground level.

The process, Norville said, was much faster than building an apartment complex from the ground up.

Construction took 12 months, and the biggest change was adding kitchens to the units. Norville expects the site to be fully occupied by the end of September.

Vivo has five projects in the works, and Norville said the company is working to acquire two other sites.

Some of the projects are extended-stay hotels where the units have larger floor plans and kitchens, which “makes our jobs a lot easier,” he said.

Once Vivo acquires a property, it has to convert the zoning to residential.

Most of the hotels Vivo is looking at are “eyesore properties,” according to Norville.

While the units are market rate and not affordable housing, he said that Vivo is able to keep rents low because of how quickly and inexpensively the company is able to convert the units.

And the properties’ former life as a hotel can allow for a good deal for amenities. Norville said lobbies could become 24-hour clubhouses with a cafe or game room and might even include some coworking spaces.

The sites are already wired for Wi-Fi, and many have meeting rooms, which Vivo converts to storage units.

The company also wants to do conversions in its home base of L.A., but Norville said “the city is a little tougher here with the zoning and the pricing.” The company is still looking for opportunities locally, though.

Nationwide, Vivo is reviewing 100 deals. Zoning is one of the key things the company is looking at when deciding which projects to take on.

Norville said he is also looking for buildings with electrical and plumbing systems capable of supporting apartment units.

The company only takes on 5% to 10% of the opportunities it reviews. In the next two years, it hopes to have 20 to 25 projects in some stage of development. The group will not do projects below 80 units.

Many times, the properties come in the form of motels with exterior hallways and parking right by the unit. “The major hotel brands will not take on an exterior corridor hotel,” Norville said. “They are kind of this obsolete product where they become lower-

end hotels or nonbranded hotels, and sink and sink and sink for years.”

He said this makes the conversions a green option. “We are reusing buildings versus building ground-up. Adaptive reuse is the most environmentally friendly way of developing,” Norville said. “We are basically a building recycling company.”

It’s also faster than some hotel conversions. Completely updating a hotel can take a year to redevelop and up to two years to get good reviews to get it situated in the market. With apartments, construction can take four to six months and another four to six months to lease up.

Leases are for 12 months, so the building is quickly at or near full while a hotel can take a while to get consistently booked.

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