Boston-based real estate investment firm Arctaris Impact Investors plans to convert the now-closed Hotel Silver Spring into a residential building with 227 multifamily units starting later this year.
We reported last week that the former hotel at 8727 Colesville Road would be converted into affordable multifamily housing in downtown Silver Spring, with Arctaris investing $27 million in the project.
The investment was made in partnership and partially funded by Erie Insurance as part of a $20.5 million social impact commitment to support companies and development projects in underserved communities within the company’s footprint, in addition to other projects in Lima, Ohio, Pittsburgh, and Washington, D.C.
Arctaris Impact said in a press release last month that this investment is the company’s sixth in the region and will help address the housing affordability crisis in the area, with over half of the converted building’s units designated as affordable housing.
“Affordable housing remains a challenge in Montgomery County, and this project intends to provide more options for local residents in a high opportunity submarket within the metro area,” the company said. “By utilizing Montgomery County’s PILOT Program, half of the Property’s units will remain affordable to households earning up to 60% of the Area Median Income (AMI).”
Bethesda Magazine reported last week that the Montgomery County payment in lieu of property taxes (PILOT) program essentially lowers or abates the property owner’s payment of the county’s property taxes for the development of affordable housing in rental housing projects.
With the PILOT Program, half, or approximately 114, of the converted apartment building’s units will be affordable to households earning up to 60% of the Area Median Income.
The purpose of Montgomery County’s Payment in Lieu of Taxes (PILOT) program, essentially a tax abatement, is to support the construction and preservation of affordable multifamily rental housing.
A PILOT lowers, or in some circumstances completely abates, for a period of years, the County’s real property taxes on rental housing projects located in the County in return for a property owner’s commitment to provide affordable housing.
Unless otherwise waived by the application jurisdiction, a property owner who receives a PILOT from the County must pay all State real property taxes, municipal taxes, front foot benefit charges, and other applicable fees.
The Standard PILOT program provides a real property tax abatement in exchange for providing affordable units to low-income residents. The amount of the tax abatement and its terms are negotiated based on the number of affordable units and the duration of their affordability.
The “by right” PILOT abates all County real property taxes for a term of at least 15 years for a rental property owned or controlled by a non-profit if at least 50% of the units are leased to households with incomes no greater than 60% of the area median income (AMI).
The Washington Metropolitan Area Transit Authority (WMATA) PILOT applies to new construction, high-rise residential developments that include at least 50% rental housing and are built on property leased from WMATA in the County. For qualified projects, the WMATA PILOT exempts 100% of the real property tax for 15 years.
The 13-story, 248-room Hotel Silver Spring was rebranded from DoubleTree by Hilton in 2023 following the conversion of the former Sheraton on Georgia Avenue.
The building was formerly home to the beloved Sergio Ristorante Italiano, a downtown Silver Spring staple for 37 years, which closed in 2020 due to financial difficulties arising from the pandemic.
The hotel began a liquidation sale following its closure on May 29, which is currently ongoing.
Once completed, the 227-unit multifamily building, which has yet to be named, will feature amenities such as a covered pool and fitness center, a rooftop lounge, a co-working space, and tenant storage.
Arctaris is partnering with GoodHomes Communities, a real estate developer based in New York City that specializes in acquiring hospitality and senior living properties to convert them into residential buildings. Additionally, Arctaris is working with the Los Angeles-based housing nonprofit Housing on Merit to support the management of the conversion project.
In addition to the upcoming Hotel Silver Spring conversion, Arctaris and GoodHomes have started converting a former Embassy Suites in Baltimore into a 303-unit multifamily development.
“We are proud to provide Montgomery County with new affordable housing solutions in an area that also offers residents additional social benefits, including healthy food options and public transit,” said Arctaris Managing Director Anita Graham. “Affordable housing is a necessity for communities like Silver Spring because it not only boosts the local economy, it also promotes financial stability and improves the well-being of its residents. Arctaris Impact continues to look for new opportunities like Silver Spring that address affordable housing shortages and allow communities to reap the benefits of living in more desirable neighborhoods.”
Site work at the former Hotel Silver Spring is scheduled to begin later this year, according to Bethesda Magazine. Arctaris expects that construction and rehabilitation will take up to 18 months, after which the building will be available for lease.