An Austin, Texas, company that specializes in converting hotels to apartments is proposing to turn the Hotel Elegante Conference & Event Center into 642 “attainable” apartments under plans filed Monday with the city of Colorado Springs.

Under the plan, the 496-room hotel at 2886 S. Circle Drive, the city’s second-largest, would remain open during the one-year first phase, which would convert 201 rooms to mostly studio apartments. Those rooms are already being rented on a weekly basis by the hotel. The hotel would  close at the start of a second one-year phase as the remaining 295 rooms are converted; the ballroom and conference space would then be renovated into an additional 146 units during a final one-year phase.

Construction is scheduled to begin by year’s end, but the project is far from a done deal. The company that is proposing the project, SHIR Capital, must still buy the hotel and get city approval for amendments to the hotel’s development plan before construction could begin.

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Elam Gordan, a SHIR principal, said the hotel has been under contract to be sold since December and the project will move forward once city approval and financing are in place. He declined to reveal terms of the transaction, such as the purchase price or cost of renovating the property, but said “a lot of money will be invested” in the project.

“We put it under contract during the thick of the pandemic, when no one was traveling,” Gordon said. “I am very hopeful we will get this done. We keep checking off boxes, but there are still some hurdles. We can’t get financing (in place) until the city signs off on our plan. No one will lend on a hotel, but they will on multifamily projects. We’re going to deliver something very exciting for  the community. We will have a lot of amenities and be an asset to the community.”

Ed Okvath, the hotel’s general manager, declined to comment on the filing.

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Under the conversion plan, the hotel’s restaurant, gift shop, outdoor swimming pool, dog park and several courtyards would remain for use by residents of the complex, which would be renamed the Residences at Hotel Elegante. The hotel’s tennis and basketball courts would be converted into parking lots for apartment tenants.

SHIR owns 2,800 apartment units in Pennsylvania, South Carolina and Texas as well as construction and property management companies. The real estate investment firm has acquired seven hotels in Austin, Texas; Greenville, S.C., and Pittsburgh since 2015 that it has converted or is converting to apartments and has another in Dallas under contract to purchase, Gordon said. The company also has acquired and remodeled 12 apartment complexes in Pittsburgh and Austin and San Marcos, Texas.

“Our main business had been buying and renovating apartments and we developed a side business of buying and converting hotels to multifamily housing,” Gordon said. “Since the (COVID-19) pandemic that has become our primary business. A lot of lenders were taking back hotels (in lieu of foreclosure) and owners were trying to sell them to avoid foreclosure. There are still a bunch out there available.”

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Although SHIR mostly targets distressed hotels, Gordon said the company targeted Hotel Elegante because of the rapid growth and development of the Colorado Springs area. He called the hotel “a phenomenal operation” that is not distressed or in disrepair.

Hotel rooms generally have about 300 square feet of living space, or half to third-thirds the size of the average studio apartment, so SHIR charges lower rents than the market rate for those apartments, Gordon said. The company typically targets restaurant servers, retail employees and other blue-collar workers who can’t afford larger apartments, he said.

“They don’t have high incomes but want their own unit. They are very price sensitive and the rents we charge are a very big selling point,” Gordon said. “When we shopped around the Colorado Springs area, no studio units (of any size) were available.”

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Hotel Elegante was built in two phases in 1974 and 1984 and has operated under the Four Seasons, Sheraton, Clarion and Crown Plaza names before a partnership controlled by Texas investor John Bushman acquired the property out of receivership for $14 million in 2013. He spent another $2 million replacing all guest room mattresses, adding a Starbucks Cafe, a Blue Bell Ice Cream parlor, a playground for children, a sports bar, a fire pit and outdoor seating.

Bushman invested nearly $25 million from 2010-13 buying Colorado Springs foreclosed or financially troubled properties that included another hotel, the former Macy’s store at The Citadel mall, a mansion in the Broadmoor Resort Community and 32.5 acres near the Colorado Springs Airport that later became the site of a FedEx distribution center.