Budgetel Inn on Market Street in Wilmington to see new apartments

Developers are moving forward with plans to bring more than 230 apartments to a Market Street hotel once deemed a “nuisance” property by the city of Wilmington.

California-based Vivo Investment Group purchased the Budgetel Inn and the 7.7-acre site surrounding it for $11 million in December, according to New Hanover County property records.

Later that month, the company submitted plans for the project, located at 4903 Market Street, to the city of Wilmington. The plans are currently under review by city staff.

Converting hotel rooms into long-term rentals has become a business model for Vivo Investment Group. The company has 13 projects nationwide, including the Market Street location, according to their website.

The company converted their first hotel back in 2019 in Ogden, Utah before starting Vivo Investment Group in May 2020, according to Akash Rohera, the group’s director of finance.

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Transforming hotel rooms into efficiency apartments helps offer more housing options in high-rent and high-demand markets like Wilmington, Rohera wrote in an email to the StarNews.

“Rising construction costs, high rent growth and lack of developable land has made it almost impossible to build new apartments and offer cheap rent,” Rohera wrote. “Our mission is to solve America’s housing crisis, and converting low demand hotels and motels into workforce housing is one way to achieve our goal.”

The company plans to renovate the hotel’s existing 224 hotel rooms into 234 efficiency apartments by adding kitchens to all of the units and making other updates to room interiors. They also plan to construct a coworking space, game room, lounge and self-storage in the 10,500 square-foot space that serves as the hotel’s front lobby and formerly was a restaurant, Rohera wrote.

A project of that size typically takes the company between nine and 12 months, according to Rohera.

Currently, the company is working on deferred maintenance, landscaping, paint and new flooring at the hotel. They are waiting for the building permits needed to add kitchens to hotel units that don’t have them. The hotel will continue operating, as usual, while the deferred maintenance occurs, Rohera wrote.

While the rents of most of the apartments will be market rate, the developer has committed to renting at least 10% of the apartments – 23 units – at a workforce housing rate for at least the next 15 years.

To make way for the project, the site was rezoned in October from a regional business district to an urban mixed-use zoning designation with approvals from the Wilmington Planning Commission and the Wilmington City Council.

The current building was built in 1965 and has served as a hotel since at least 1975, according to New Hanover County property records and information from the city of Wilmington. The site has housed several hotel chains over the years.

In 2016, the city of Wilmington took legal action against the property and five other hotels along Market Street, calling them a nuisance because of repeated incidents of controlled substance use along with loitering and prostitution on the site.

On July 18, 2016, the New Hanover County Superior Court entered a judgement against the hotels. The judgement prevents current or future owners from “maintaining a nuisance” anywhere on the property, according to a case summary of the site prepared by city of Wilmington planning staff.

The order specified several uses that are prohibited on the site, including use as any type of private club, topless bar, lounge, night club, or any business which might attract similar gatherings of people, the summary states.

The city of Wilmington filed a lawsuit in July 2016 against Hotels Plus LLC, the owner of the Budgetel Inn, that asked for a restraining order to prevent the hotel from operating. 

Related coverage: ‘Nuisance’ Wilmington property transforms into boutique hotel along Market Street

Ultimately, the hotel’s owners came to an agreement with the city of Wilmington to halt the restraining order. They agreed to require all guests to present a photo ID and credit card when checking in, keep a hotel registry, issue parking permits to guests, employ an overnight security guard and install more security cameras, among other measures.

Vivo Investment Group was interested in converting the site because of its proximity to the University of North Carolina Wilmington, a bus stop, retail businesses and the Market Street corridor, Rohera wrote in an email to the StarNews.

This project isn’t the only re-investment happening in the Market Street area. Next door, the former Ramada Inn is seeing big renovations. The hotel was also the subject of the city’s judgment in 2016. 

Greensboro-based Seraj Enterprises Inc. is in the process of converting the former Ramada Inn into two Hilton-brand hotels. Construction has been ongoing on the site since November 2020.

Reporter Emma Dill can be reached at 910-343-2096 or edill@gannett.com.

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