Commercial real estate investment, development and lending platform Driftwood Capital has kicked off the $31 million conversion of an 11-story office building into a new Staybridge Suites hotel in downtown Wilmington, Del. The property, which will have 134 suite-style rooms, is expected to open in the second quarter of 2022.
The project team includes Whiting-Turner Contractor Co. and Dever Architects. The Delaware State Housing Authority will contribute up to $1,020,000 toward the project through its Downtown Development Districts Rebate Program, and Driftwood Hospitality Management will manage the property when it opens.
First International Bank & Trust provided a construction and permanent loan for the project of up to $14,950,000. This is the second construction and permanent loan the bank has placed with Driftwood Capital; the bank also provided financing for Driftwood to develop the Canopy by Hilton Tempe Downtown, in Tempe, Ariz., which opened in 2020.
Driftwood Capital acquired the Delaware property in March 2019. Its location in a designated Opportunity Zone, combined with Wilmington’s long-term economic outlook, contributed to the company's decision to develop a hotel on the property. Driftwood Capital continues to raise capital through a Qualified Opportunity Fund associated with this development.
“The City of Wilmington continues to grow with many new businesses and jobs, but in the city’s urban core at least, there have been no new hotels developed to service the growing number of corporate and leisure guests,” said Nelson Parker, managing director of development at Driftwood Capital. “Driftwood Capital saw an opportunity to fill a void in the hotel market, and because this is a conversion, we will be ready to launch in a matter of months versus years. The Opportunity Zone designation provided another compelling case, as it will allow both Driftwood and its co-investors to reduce their tax burdens both immediately and well into the future.”
Investment in a property or business through a Qualified Opportunity Fund allows investors to defer paying capital gains rolled into the fund for up to nine years, with tax on capital gains eliminated altogether if the investment is held for at least 10 years.
In addition to the 134 all-suites rooms, the new hotel will include a lobby lounge, a fitness center, a sundries shop and a business center with meeting space.