Scottsdale-based investment firm, Sterling Real Estate Partners, recently acquired Hotel Tucson City Center in an off-market transaction with plans to convert the hotel into market rate apartments.
Originally built in the 1960’s, the 278-unit downtown hotel will be transformed into a modern, 210-unit apartment complex with approvals to develop an additional 154 units. This acquisition marks the first adaptive reuse project undertaken by Sterling.
“We are really excited about the business plan and location of the property. It is a rare, underutilized 10-acre site next to the historic El Presidio Neighborhood District in Downtown Tucson,” said David Zeff, President of Sterling Real Estate Partners. “Throughout Covid, we have been pursuing the arbitrage between the value of hotels and apartments. This property also has the additional benefit of excess land for future development.”
Sterling had the property under contract since January 2021 while it underwent the rezoning process for residential use. Sterling collaborated with the neighbors throughout the process to receive zoning approval without opposition. Upon acquisition, Sterling will become a Choice Hotel franchisee and has engaged Ledgestone Hospitality to operate the four-story building as a hotel while the adjacent buildings are converted to apartments. Additionally, the site was approved for an additional 154 units that will be developed at a later date.
“While the price for existing apartments continues to exceed replacement costs, this is another opportunity for Sterling to find and create value in this market,” added Zeff.
The seven building, 10-acre site is located adjacent to the historic El Presidio neighborhood. Its proximity to downtown and direct access to I-10 make the property highly accessible to nearby employment and entertainment hubs. Residences will consist of luxury studio and one-bedroom units ranging from 300 to 700 square feet.
Site amenities will be updated during the conversion with upgrades budgeted for the pool area, fitness room, clubhouse, conference room, dog park, and outdoor lounge. Upon completion, the apartments will offer low gross rents with luxury interior finishes to support the high demand for quality and affordable housing in the downtown submarket.