Vivo Living turns empty hotels into apartments amid the pandemic. Dan Norville, Vivo Living President, joins Yahoo Finance’s Seana Smith to discuss the company, the hotel industry, and the pressures the housing market faces amid the coronavirus pandemic.
Video Transcript
SEANA SMITH: Empty hotels are getting a bit of a makeover. Investors are going in and buying closed hotels and motels and turning them into small apartments.
So here to talk about this and really how COVID has changed the real-estate landscape, we want to bring in Dan Norville. He's the president of Vivo Living. And, Dan, it's great to have you on the program. Thanks for taking the time.
Vivo Living-- it's important to point out for our viewers you started doing this prepandemic to provide affordable housing. This is a crisis that the US has been facing now for some time. But looking at what's happened over the past 10 months, I guess my question is to what extent has the pandemic worsened the affordable-housing crisis within the US?
DAN NORVILLE: Yeah. Thanks, Seana. It's great to be here. We saw this issue come, and I think a lot of people have seen it over the last decade or longer. I mean, I remember growing up. My mom worked for the state, and we always struggled to make rent on our apartment-- single mom, tough environment even back then. That was 20, 30 years ago. So it's only gotten worse just in recent decades.
But now with what's happened with the pandemic, with just the crowding out of urban centers-- I live in LA, in downtown LA with these brand-new skyscraper high rise multifamily that's coming in, far too unaffordable for anyone that works as a service worker. The backbone of our society we call them-- you know, the heroes housing, the nurses. The people that need housing are moving often that need transitional housing. There's not a lot of options for them these days, and we're seeing more and more. We're hearing it's, you know, in the millions, 3 million, now going to 4 million of people that are living at home with family that can't afford to rent these days but have income and want to rent and want to be in these situations.
But obviously it's difficult to bunk up in a roommate situation these days with a two-bedroom apartment and not be very isolated or quarantined. Our solution, we're primarily studios where you have your own kitchen and your own bathroom and your own space. And we don't even refer to it as affordable housing. It's value housing, reasonable housing for people that need these things.
And because they're hotels, we can provide great amenity spaces that are unlike any hotels-- any other apartments out there. Our competitors are these 1970s, 1980s apartment buildings that haven't been renovated, don't have amenities spaces. We have coworking built into ours. We have game rooms, social spaces. We're really trying to pursue that triple-bottom-line philosophy of social, profitable, and being green.
And the green side-- when I look at these hotels that are suffering today, a lot of people in certain good environments are going to scrape these things. Imagine putting one of these hotels into a landfill. It's pretty much the least environmentally friendly thing you can do, and we're coming in and finding a very good way to reuse these, to recycle these hotels. We consider ourselves a building recycling company.
SEANA SMITH: So Dan, when you're identifying these-- when you're identifying these hotels and the motels that you are then going in and buying and repurposing them like you're talking about here, in what market does this type of business plan work best?
DAN NORVILLE: We haven't found a market yet that it doesn't work well in. Honestly, we're really still trying to find that out. Because of the need and because of the demand for this workforce housing across all sectors, we're seeing a demand in every market we go into, and it's really that value price point, right? It's the whole-dollar rent that these tenants are paying and what we're able to offer, that affordability aspect, right? If you're paying $800, $900 a month, that's a reasonable price point where you're only spending 30%, 40% of your income versus 50% on a class A new-build apartment building.
SEANA SMITH: So Dan, if it works across all regions-- you're saying you haven't found an area that it hasn't worked yet. You've had to make tough decisions, though. You had to identify certain areas where you at least want to start. So when you are identifying those properties to buy, what are you looking for?
DAN NORVILLE: We are looking at the demographics. We're looking at vacancy rates in the market, places that really need that housing. Obviously if it's a high-vacancy-rate market for that class B, class C multifamily, it's not an area of high demand as we can see it. But we are looking at other demographics-- population growth, areas where there will be a younger proportion of millennials and Gen Zers, the high-rentership populations that really show the demand for these, that there's a high demand needed.
SEANA SMITH: Dan, how long do these conversions typically take? Once you go in and buy this hotel or motel, what's the turnaround time for then when you can market it and potentially sell it or rent it to the people who need it?
DAN NORVILLE: That's really the beauty of it. We're able to get it and convert rather quickly. We're looking at projects that have a relatively easy path in the zoning and entitlement side of things. So if we can get in quickly, submit our permits and our building plans right after we close on the acquisition, it's about a four- to six-month process to turn these things around and get them ready for the first leasing.
In certain ones that are extended-stay hotels that already have kitchens, we've been as fast as one month to start the lease-up process. So it really varies deal by deal, but we're at anywhere from one to six months before we can start leasing.
SEANA SMITH: Dan, has COVID altered your strategy at all? I mean, you're in a business that is basically built for a situation like this, but has it accelerated your plans to expand at all, or have you had to pull back just because of certain restrictions in certain areas due to COVID?
DAN NORVILLE: It's certainly accelerated it tremendously. Previously, though, the strategy worked. We've been in the hotel space for about a decade now. We manage a lot of hotel units as well, and we've noticed this strategy in 2018, 2019, that there's a lot of older, functionally obsolete hotels out there that are these two-story, exterior-corridor hotels that the Marriotts, the Hiltons, the Hyatts of the world don't want to brand those projects. They're everywhere. You see them when you're driving around. You just don't notice them.
But those functionally obsolete hotels look exactly like a garden-style multifamily property, and they exist all over the US. And what it-- ultimately, there's not really a future for them, and that's what we initially saw as the greatest strategy here, to go into those types of hotels. But certainly with the pandemic it's been exacerbated, and now all hotels are kind of within our wheelhouse, if you will.
SEANA SMITH: Yeah, certainly a very, very tough time for that industry. Well, Dan Norville, president of Vivo Living, we thank you so much for taking the time, and happy New Year.
DAN NORVILLE: Thank you.