NCC to hire former Sheraton owner for shelter

HHM, the former owner of the Sheraton Wilmington South, is proposed to manage county’s new homeless shelter set to open this month. | PHOTO COURTESY OF JLL

NEW CASTLE – The county will contract the former owner of the Sheraton Wilmington South hotel, which it bought at auction in October in an audacious plan to convert it into a homeless shelter, to run the new venture.

The New Castle County Council unanimously approved a contract with Philadelphia-based HHM, formerly known as Hersha Hospitality Management, at a cost of more than $2.5 million at their Tuesday evening meeting. The council agreed to waive the competitive bidding process required for expenses over $50,000 in order to expedite the opening of the new shelter and meet the spending deadline for federal funds.

New Castle County won the October bidding on the 192-room Sheraton located at 365 Airport Road off Interstate 95 at $19.5 million but paid about $20.5 million with transaction fees factored in at closing Dec. 1. The county used its federal CARES Act stimulus funds to acquire the hotel, and those funds have to be expended by Dec. 31 under the terms of the congressional legislation.

While officials initially deferred commenting on how much it would cost to run the facility, saying they were still tabulating the cost, it is now apparent that it will run a few million a year. In funding the management contract with HHM, the county is seeking to draw on a number of funding sources. That includes $252,400 from the CARES Act, $733,000 from the U.S. Department of Housing and Urban Development’s Community Development Block Grant (CDBG) program, and $500,000 from the county’s Housing Trust Fund. The bulk of the funds at $1.05 million, however, are being drawn from “anticipated program income.”

It is unclear what income the county expects to derive from the shelter, which critics have argued is too far removed from necessary supportive services and potential employers to be effective. County officials have said they intend to bring social services to the shelter to serve those transitioning out of homelessness and are working with DART to provide a bus connection.

The county anticipates placing the first people in the hotel this month. According to the 2020 Point-In-Time Survey that annually tracks the homeless population each January, New Castle County had 665 homeless people. As of Oct. 19, the county’s 15 homeless shelters had 199 of 300 beds available to the homeless, but many required either a negative test or a 14-day quarantine before entry.

The audacious plan, which will remove the hotel from the county tax rolls, was spurred by similar homeless housing projects in Los Angeles, Minneapolis, and Forth Worth, Texas, according to officials.

HHM had been the frontrunner to operate the shelter, at least in its initial year. Carrie Casey, manager of the county’s Division of Community Development and Housing, told county officials in October that the two were in discussions about a potential contract. The hotel owner already has a similar agreement with a shelter in New York that coincidentally also formerly operated as a Sheraton, Casey said.

The awarding of the contract allows HHM to recoup some of its investment on the property. It lost money on its investment of the Sheraton, having purchased it in 2010 for $15 million and pouring $6.4 million into a large-scale renovation that was completed in May, amid the worst of the COVID-19 pandemic’s economic impact. HHM still owns the Residence Inn Wilmington in the city’s downtown.

Editor’s note: This story was updated after the council’s affirmative vote.

By Jacob Owens

jowens@delawarebusinesstimes.com