A former downtown Baltimore Embassy Suites hotel that closed during the pandemic will be converted into 303 affordable housing units by summer 2026 under a new owner’s $30 million plan.

The St. Paul Place hotel was sold in November for $7 million, state property records show.

The new owner, Massachusetts-based Arctaris Impact Investors, said Thursday it expects to fill the demand for workforce housing in downtown’s central business district, in part spurred by the relocation of thousands of state workers from the aging State Center complex.

“We recognize that across the country there’s about a $7 million-unit deficit of affordable housing, and certainly a lot more needed in Baltimore,” said Andrew Gibbs, an Arctaris principal.

Arctaris, which says it aims to combine financial returns with social and environmental improvements such as housing and job creation in underserved communities, has been active in Baltimore.

It has invested $59 million in at least five real estate or small business ventures through a public-private partnership with Baltimore-based Abell Foundation and the Neighborhood Impact Investment Fund.

“Arctaris Impact has had a longstanding commitment toward Baltimore city’s revitalization, and that fits into our national strategy of partnering with underserved communities, both urban and rural around the United States,” said Jonathan Tower, Arctaris chief executive officer.

The investor expects to overcome some of the bigger hurdles of building affordable housing, such as high construction costs and high interest rates, because the former hotel started out as an apartment tower, was bought at a discount and is located in a federal opportunity zone.

The building’s original design as apartments in the 1960s will make the project less costly than typical hotel-to-housing or office-to-housing conversions and far less expensive than new construction, Arctaris executives said. And the opportunity zone designation offers special tax benefits.

“There’s very little structural work that needs to be done,” Tower said. “The interior walls are in the right place, the plumbing is in the right place.”

Tower said the company expects to deliver the housing units at about 25% of the cost of new construction.

The 37-story building had been the Tremont Plaza Hotel for decades. In 2013, it was converted to Embassy Suites Baltimore-Downtown, at a time when parent company Hilton was expanding the brand in urban markets. The hotel near Mercy Medical Center underwent a $14 million renovation during its conversion from Tremont to an Embassy Suites.

Arctaris said it plans to work with a general partner and developer, New York-based GoodHomes, which converts distressed hotels to workforce housing.

The apartments will be built to be affordable for households earning up to 80% of the area median income. The owners hope to attract a coffee shop or bakery to street-level retail space.

A previous proposal to convert the hotel to housing never materialized.

After the hotel closed, it and a companion property, The Grand, were sold for $18 million to Washington-based investors Urban Investment Partners Cos, which proposed an apartment tower, to serve a growing downtown population, according to a July 2021 announcement by The Downtown Partnership of Baltimore.

The company was working toward a goal of raising $11.6 million in equity capital. The property ended up heading to a foreclosure auction that was later canceled.

Erie, Pa.,-based Erie Insurance has invested in the GoodHomes project as part of a $20.5 million social impact commitment to fund companies and development projects in underserved communities within the insurer’s footprint.

Erie and Arctaris have invested together in social impact projects in Washington, Pittsburgh and Lima, Ohio.

Have a news tip? Contact Lorraine Mirabella at lmirabella@baltsun.com, 410-332-6672 and @lmirabella on X.