Jason Grove and Tina Smothers have converted two properties into workforce housing in the past five years: Dormitories on the former AIB College campus in Des Moines and an extended-stay hotel in Clive.

So, when the then-owners of the six-story Clive Hotel at 11040 Hickman Road approached the business partners in mid-2023 about acquiring the property, Grove and Smothers didn’t immediately jump at the proposition.

“This wasn’t a project that we were out looking for,” Grove said.

But, after visiting the property and discovering a majority of its rooms included kitchenettes with sinks, the pair decided to move forward with the acquisition. 

Jason Grove and Tina Smothers purchased the former Clive Hotel at 11040 Hickman Road in December. The hotel is being converted to multifamily housing. Photo by Kathy A. Bolten

In late December, Grove and Smothers bought the property for nearly $5.9 million from Batra Hospitality Group Inc. The property, which includes 2.4 acres, is valued at $2.3 million.

A day after the transaction was completed, the hotel closed and work on the conversion to multifamily began.

“Having the kitchen sinks already in the units made this conversion project work,” Grove said. “It’s incredibly expensive to retrofit sinks. If we would have had to do that in all the units, we financially couldn’t do workforce housing.”

Hotel conversions to multifamily have been on the rise nationally in recent years.

In 2022, 29%, or 2,954 of the 10,186 buildings converted to multifamily were hotels, according to data compiled by Rentcafe.com. A year earlier, just 2,060 hotel-to-multifamily conversions occurred.

Two things are likely driving the increase in hotel conversions, real estate experts say. One is that older hotel properties are unable to compete with sparkling new facilities that offer a myriad of amenities, according to a 2022 article in Urban Land, an Urban Land Institute publication. Converting hotels to multifamily residences also is typically less expensive than building new, especially for projects aimed at providing workforce housing.

“In order to create workforce housing, and to get into the rental price range that we want to be in, it’s difficult to do new construction and still be in that price range,” Grove said. “Retrofitting existing properties into workforce housing has really been our niche. We have been able to find the right property, in the right location and provide a new type of housing that is in high demand.” 

In March 2022, Grove and Smothers bought property at 11428 Forest Ave. in Clive that originally was a Marriott Residence Inn. The property changed hands several times before Grove and Smothers bought it and converted it to workforce housing. By October 2022, when renovations at the Vibe at 8035 were complete, over 90% of the property’s 112 units were leased, said Grove, whose background is in finance and buying and selling properties.

In 2019, Grove and Smothers purchased the former AIB College of Business campus southwest of downtown Des Moines. The two renovated what was known as Fenton Hall East and West, turning the former campus housing into affordably priced apartment units, nearly all of which are leased.  

A workforce housing study released in May 2019 showed that Polk, Dallas, Warren and Guthrie counties need to add 33,592 owner-occupied housing units of all types as well as 23,577 new rental units before 2038.

The study also showed that 70% of the area’s new households would have annual incomes of $75,000 or less and would need affordably priced housing. That means a majority of new rental units need to charge monthly rental rates of $1,250 or lower, the study said.

Monthly rental rates at the McCoy at 8035 will start at $850 for a studio unit; the monthly rate for a two-bedroom apartment, which includes about 1,070 square feet of space, will start at $1,425.

Demand is high for affordably priced rental housing, especially on the west side of the Des Moines metro area, said Smothers, whose background is in rehabilitating and managing multifamily properties.

“There’s just not a lot of studio [apartment units] in this area,” Smothers said. The McCoy, like the nearby Vibe at 8035, will have utility price guarantees that includes water, electric and internet.  

“That helps people to really be able to budget,” she said.

Smothers said she is finding that residents are “more and more living minimally. … When you look at the size of the spaces in major metropolitan areas, studios the size of these are pretty common.”

About 60%, or 72 of the McCoy’s 120 units, will be studio-sized apartments. The building, constructed in 1974 as a Sheraton Hotel, will also include one- and two-bedroom apartments. Kitchenettes will be added to about 30 units. All of the units will have new appliances, flooring, lighting and countertops and refaced cabinets. Large closets will be added to the one- and two-bedroom units.

In the spring, the building’s exterior will be painted and a large patio with a grilling area added.  Plans also include a fenced-in dog park with seating.

Residents at the Vibe like the property’s outdoor and indoor spaces, which includes a club room. “We are creating those types of spaces [at the McCoy] too,” Grove said.

Renovations at the McCoy are expected to be completed within the year. Some units could be ready to lease in about three months, Grove said.

Residents of the McCoy will be within walking distance of a coffee shop, restaurants and retail stores. The apartment building is about one-half mile north of Clive’s Greenbelt Trail.

Residents will also have access to Genesis Health Clubs, which is adjacent to the multifamily property, Grove said. In exchange, Genesis members will be able to park in the apartment’s lot.    

“Coming off the pandemic, people want to be out socializing more,” Smothers said. “This building is perfect for that. There’s a Starbucks next door. Restaurants within walking distance and nearby recreational trails.

“We think demand will be high.”