Summerhill Ramada Sold At Auction, Rebranded, Eyed For Conversion
An Atlanta commercial real estate investor has made the biggest buy of his career so far with the former Ramada Plaza Atlanta Downtown hotel.
But the 375-room hotel's destiny is unclear as Pellerin Real Estate considers converting a portion of it into workforce and affordable housing.
“Right now, we're kind of taking a breath and figuring out exactly what we're going to do with the property,” Pellerin Real Estate CEO Philippe Pellerin said. “I think it will be some combination of hotel and multifamily.”
Pellerin purchased the property, located at 450 Capitol Ave., last month through an auction on Ten-X, an online property bidding platform. Pellerin paid $14M, or $37,300 per room, for the 232K SF property, which was built in 1972, according to CoStar data.
Ramada has since been removed as the hotel operator with New York-based Life House taking over management and operations and renaming the property The Atlanta Downtown Summerhill Hotel, given its proximity to the revitalizing Summerhill neighborhood.
Pellerin's firm has invested and redeveloped many retail and restaurant properties in Southeast Atlanta over the years, including The Beacon, a $30M, 110K SF mixed-use project in Grant Park along the BeltLine Southside Trail. Pellerin also is underway with The Marbut mixed-use apartment project in the East Atlanta Village, on the site of the former Marbut & Minor Mercantile Store.
That project is Pellerin's first ground-up multifamily project ever. But the former Ramada represents Pellerin's largest single purchase to date, and the firm's first foray into the hotel sector, Pellerin said.
Given the economic shocks currently facing the hospitality industry, this is a good time for Pellerin to reconsider other uses for the property, Life House CEO Rami Zeidan said, especially given that the hotel's rates are on the low side in Atlanta.
“If this were to operate as a Ramada on a continuous basis, the owner would likely lose money for the next 18 to 24 months,” Zeidan said. “If you flood the market with inventory and no demand, the lower-rated hotels will suffer the most.”
While mixing housing and hospitality in the same property is not a new phenomenon in the U.S., it may become more prevalent as hotel owners struggle to figure out what to do with ailing properties amid the pandemic.
“Continuing to do the same thing that we've always done it's pretty clear there's a lot of risk in that. I think getting creative is the only response,” Hive Marketing founder Susan Barry said.
Hive Marketing is an Atlanta-based hotel marketing and branding firm.
“The hotel industry has never faced an inflection point quite like the one we are at now, and every possible idea is on the table,” Barry said. “I've heard ideas for converting hotels into multifamily and especially condos, student housing, medical facilities, and even accommodation for people experiencing homelessness.”
B & Co. President Brigette Breitenbach, whose firm specializes in marketing and rebranding of hotels, said her firm is seeing a lot of hotel owners begin to distance themselves from major chains and create small boutique inns and other hotels, especially as a way to combat Airbnb.
“I think people are trying to find ways to make sure they can make it through this crisis,” Breitenbach said.
Pellerin said this won't be his firm's last hotel purchase, and that pricing of hospitality properties is appealing for investors right now, given the industry struggles. Pellerin is targeting to acquire 1,000 hotel rooms in the next year across the Southeast and is currently in talks to buy hotels in Jacksonville and Dallas, he said.
But unlike the Ramada, those hotels will likely stay as such, but with a rebranding and operational change, he said.
“I think it really becomes a property and community-specific question,” Pellerin said.