A Greensboro hotel developer has acquired its second site in downtown Raleigh.
NCR Hospitality Corp., an entity controlled by Greensboro-based CN Hotels, paid $2.05 million for a .59-acre site at Davie and Dawson streets, according to property records. The land was once home to Buffalo Tire & Car Care and is next to the Wake County parking deck that the L Building wraps around.
CN also owns a .71-acre site on the north side of Davie Street, which it acquired in 2012.
The company’s purchase is yet another reminder that downtown Raleigh is not suffering from a lack of interest from hotel developers.
As the economy has recovered and downtown has become more of a destination for visitors, the performance of its existing hotels has improved and the need for additional rooms has become more acute.
But thus far all that interest has not translated into more actual hotel rooms downtown.
“It seems that a lot of hotel deals are taking longer than anticipated” to begin construction after they are announced, said Marcus Jackson, managing director of urban investments for TradeMark Properties.
Jackson said one issue complicating deals for developers is rising construction and land costs.
“There is strong economic movement in downtown Raleigh, but there’s a potential squeeze play of increasing construction pricing and spiking land prices,” he said.
The financial formula that developers use to justify a hotel project is also different from those used for other types of commercial properties.
“It’s a combination of operating and real estate, but it’s heavily emphasized on operations, so it’s a whole different beast, really,” Jackson said.
The first new project to break ground will be Summit Hospitality Group’s 166-unit Marriott Residence Inn, which is to be built on the west side of Salisbury Street, between West Lenoir and West South streets. Groundbreaking is scheduled for Jan. 7.
It’s unclear what the timeline will be for other projects. Some developers may be waiting for the city to reduce the number of parking spaces it requires of hotel developers, a move that the City Council backed in October. The city currently requires one parking space for every hotel room.
An executive with CN Hotels didn’t return a call seeking comment about the company’s plans for its two downtown sites. CN manages a portfolio of more than a dozen hotels in Florida, North Carolina, South Carolina and Virginia and currently has a number projects under development.
The company’s website lists plans for a dual-branded project in downtown Raleigh that would feature a 135-room Hilton Garden Inn and a 111-room Homewood Suites. Both hotels are scheduled to open in winter 2017, according to the website.
CN’s site is just a block west from where Windwood Hospitality Group plans to eventually build a hotel.
In July, Winwood paid $4.05 million for the Enterprise Rent-A-Car site that fronts McDowell Street, across Cabarrus Street from the Raleigh Convention Center.
Winwood is in no hurry to move ahead with its project. It plans to extend Enterprise’s lease for another 24 months while it secures the necessary approvals for a hotel. Depending on market conditions, the Morrrisville company hopes to begin construction after Enterprise’s new lease expires.
Narsi Properties plans to build a 12-story hotel at South Wilmington and East Lenoir streets, a few blocks southeast of Winwood’s site. The project would involve demolishing the General Baptist State Convention building that is now on the site.
Another hotel project is also likely to be proposed for The News & Observer’s 3-acre site. Last month, the newspaper reached an agreement to sell its property to a local development group that has expressed strong interest in placing a hotel on the site.
Loren Gold, an executive vice president with the Raleigh Convention and Visitors Bureau, said some things that have deterred downtown hotel developers in recent years – lack of financing and sluggish growth in room rates – are easing.
“A lot of the local indexes that developers and hotel developers look at ... continue to climb,” he said. “I think the timing’s finally right. I’m not saying we’re going to catch up, but I think the development market’s finally ripe.”