As the pandemic ravages the hospitality industry across the country, forcing hotels to close and lay off thousands in the Austin area alone, at least one Austin-based real estate investment company sees opportunity. SHIR Capital is shifting from buying apartment complexes with value-add opportunities to buying hotels that it can convert into affordable, micro-unit apartments.

“Coronavirus comes then hotels take a huge hit, and now it is our primary focus,” said Elan Gordon, principal of SHIR Capital. “It is where the deals make sense for us, price point wise. On top of that, if it is in the right area it often makes sense.”

This strategy will also add hundreds if not thousands of much-needed affordable apartment units — renting at around $800 a month — to Austin. The company seeks to buy 10 to 20 hotels in prime areas across the country.

Investors are targeting limited-service hotels that they could buy for between $20,000 and $30,000 per room key. Gordon said his company has partnered with funds on both the debt and equity side to acquire hotel properties on a “price per pound” based on the number of units rather than based on its net operating income.

SHIR Capital’s first Austin hotel conversion is at the former Austin Suites Hotel at 8300 N. I-35. The process of renovating the extended stay hotel, now dubbed The Hedge, has begun. All units at The Hedge will be studio apartments of about 275 square feet each, leasing for about $750.

Charles Cirar, vice chairman at CBRE Group specializing in multifamily, said investors should look for properties with visibility, walkability to conveniences, access to entertainment, proximity to employers, and desirable schools and neighborhoods. “Many existing hotel properties in Austin, both urban/infill and suburban, do check all or most of these boxes,” he said.

SHIR Capital is a vertically integrated real estate investment group with 2,200 apartment units in Texas, South Carolina and Pennsylvania.