‘Nuisance’ hotel in Wilmington may transform into tiny apartments

The City of Wilmington Planning Commission is considering a rezoning to convert Budgetel Inn into a 234-unit apartment complex. (Port City Daily photo/Alexandria Sands Williams)

WILMINGTON –– A California investment group plans to transform a Market Street hotel with a reputation for drugs and prostitution into a cheap long-term rental option.

Wednesday, the City of Wilmington Planning Commission is considering a rezoning to convert the 224-room Budgetel Inn to a 234-unit apartment complex.

The project calls for a rezoning of the approximately 7.7-acre tract from its current district, regional business, to the high-density multiple-family residential district.


The units would go for market rate, per planning commission documents, based on their size, amenities and proximity to retail, food and transit.

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Behind the project is Vivo Living, an investment group that converts short-term lodging into long-term rentals. Since the start of the Covid-19 pandemic, it has become increasingly common for developers to buy up properties from the struggling hospitality industry to profit off the rising demand for affordable living.

Vivo Living now has 10 multifamily projects in the U.S., in Arizona, Colorado, Indiana, Nebraska, Texas, Utah and the Carolinas. The company credits itself with finding solutions to the affordable housing crisis.

Design Solutions, the firm of local land use consultant Cindee Wolf, is representing the current landowner. The application suggests this development would serve as a local solution to a growing, worrisome trend across the nation: built-out hotels with scarce guests.

Seedy reputation

Rooms at the Budgetel currently run guests $81 a night Sunday through Thursday or $185 on Friday and Saturday, according to online pricing.

Before it was the Budgetel Inn, the hotel underwent several brand changes and was known as the Holiday Inn Motel as early as 1975, according to the city’s findings. Property records show the land has been owned by Hotel Plus, LLC since 2004.

The hotel has a history of drug busts and criminal arrests that led District Attorney Ben David to send Budgetel a letter, along with five other hotels on Market Street, in 2015 demanding the businesses clean up their acts or risk losing their properties under public nuisance law.

Budgetel agreed to a consent judgment in 2016 with the New Hanover County District Attorney’s Office and could no longer rent to locals. It was also required to heighten security and give law enforcement access to their books at any time, among a lengthy list of other stipulations.

The following year, an 18-year-old man was arrested at the hotel for allegedly promoting the prostitution of a 17-year-old girl, driving her around to clients and taking portions of the money she received for the sexual acts, according to WECT.

Months later, the news outlet reported a guest discovered a dirty needle and condoms under their bed, and brown stains and burn marks on the covers, after already spending a night in the room.

Budgetel Inns & Suites has more than 45 locations in the U.S., including three in North Carolina. The branch in Raleigh has repeatedly made the news for criminal activity, including a shooting in April and five reported overdoses in the last half of 2019.

The property owners of Budgetel Inn arepursuing a rezoning to turn guest rooms into 278- and 352-square feet apartments. (Port City Daily photo/Alexandria Sands Williams)

Efficiency units

The City of Wilmington planning staff is recommending approval of the rezoning necessary for a change to tiny apartments.

The redevelopment would maintain the existing 51,500-square-foot and 46,800-square-foot two-story buildings, infrastructure, utilities and amenities, and renovate each room into a one-bed, “efficiency-style” apartment, between 278- and 352-square feet. The design combines the living and sleeping room and has one bathroom.

The units are expected to attract a young workforce, under 30, and retirees on a tight budget, according to the rezoning application.

“Efficiency‐style apartments are often considered ‘naturally‐occurring affordable,’ based on their small size,” a submission by the applicant states.

The hotel’s front lobby and former restaurant space, totaling 10,500 square feet, would be converted into the apartment complex’s new office and an amenity area.

Workforce housing

Vivo Living is agreeing to designate 23 units, 10% of the complex, as workforce housing for at least 10 years under the current proposal, though staff is recommending the plans are approved on the condition the period is extended to 15 years.

The units would need to be considered affordable to households earning 65% of the area median income, as defined by the Department of Housing and Urban Development’s High HOME rent census data. For Wilmington, the High HOME rent limit is $754 for efficiency apartments.

Staff is also recommending approval contingent upon the workforce housing units being spread throughout the site, not central to one location, and being given held to the same standards as market-rate units, from the size to the interior finishes and equipment.

To allow the conversion from a hotel to an apartment complex, 1.5 parking spaces per bedroom are required per the land development code, adding up to a minimum of 351 spots. However, the applicant is proposing 274 spaces.

The applicant is requesting an exception since the code does not specify parking ratios for studios or efficiency apartments. It is also incorporating workforce housing. Under the newly adopted land code –– which doesn’t take effect until December –– developers are offered reduced parking standards as an incentive to create workforce housing.

The site is also near an existing Wave Transit stop on Market Street and staff is suggesting the project is a chance to increase ridership for the system, which in recent years has struggled to provide quality service with its current financial state.

The planning meeting begins at 6 p.m. in the City Council Chambers within City Hall, located at 102 North 3rd Street. The meeting is streamed online as well.


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