Peachtree deploys $1.1B in commercial real estate investments

Peachtree Group, a diversified commercial real estate investment company, has revealed its credit division has closed $556 million in loan originations of the $1.1 billion the company deployed year-to-date. The remaining $526 million was deployed to acquire five hotels and undertake three new hotel development projects. The company also opened five hotels that were under construction as of September 2023.

“Commercial real estate owners who have benefited from an extended period of readily available, low-cost capital over the past 15 years are now confronting a new reality,” said Greg Friedman, CEO, Peachtree Group.

The ability to refinance maturing debt is a growing concern with an estimated $1.9 trillion of U.S. commercial real estate debt maturing before the end of 2026.

“Commercial real estate participants are faced with the pressures of higher capital costs and tighter liquidity in sourcing capital for acquisition, recapitalizations and development strategies,” Friedman said.

Peachtree Group Credit, formerly Stonehill, ranked as the eighth largest U.S. commercial real estate hotel lender by the Mortgage Bankers Association 2022 loan origination rankings. As a direct commercial real estate lender, it offers permanent loans, bridge loans, mezzanine loans, commercial property-asset clean energy (CPACE) financing and preferred equity investments across all commercial real estate sectors, with its origins in the hospitality industry.

Notable credit transactions for hotels completed this year include:

  • A $47.9-million first mortgage loan for the construction of a 215-room Autograph Collection hotel in Huntsville, AL, which is expected to open in 2024.
  • A $43.6-million first mortgage loan on the 220-room Hampton Inn New York-LaGuardia Airport to recapitalize the project and to cover the cost of deferred maintenance and CapEx.
  • A $42.2-million first mortgage loan on the 133-room Motif on Music Row (Nashville) to refinance the current debt and complete the property, which is expected to open in November 2023.
  • An $8.4-million loan in CPACE financing to fund various energy-efficient and sustainability elements of a hotel under construction in Detroit, MI.

Today, banks are under regulatory pressure and need to shore up their balance sheets and liquidity positions, causing significant lending restrictions to commercial real estate. This traditional lender disruption further elevates private credit for owners and developers to execute their business plans.

“We are experiencing an uptick in activity, with more than half of the loans that we originated closing within the past 60 days,” said Jared Schlosser, SVP, credit, Peachtree Group. “We are targeting more than $1 billion in originations for 2023 with continued growth into 2024 as we anticipate interest rates to remain elevated and banks to further reduce exposure.”

The company’s acquisition division completed five hotel acquisitions with a total of 677 keys:

  • Hampton Inn & Suites University Capital (Austin) – 137 keys
  • Homewood Suites Vanderbilt (Nashville)  – 192 keys
  • Hilton Garden Inn Atlanta North (Johns Creek, GA) – 122 keys
  • Courtyard Atlanta Kennesaw (Kennesaw, GA) – 100 keys
  • Home2 Suites by Hilton (Chandler, AZ) – 126 rooms

“Our transaction volume remains on pace as we have historically acquired 10 to15 hotels annually,” said Brian Waldman, CIO, Peachtree Group. “The overall U.S. transaction market is down year-over-year, primarily due to 2022 being an active year while debt was still relatively affordable debt a wide availability of regional lenders and improving operating fundamentals, whereas in 2023, the tightening of the debt capital markets has materially impacted transaction velocity. We have been uniquely positioned to acquire most of the hotels off-market leveraging our deep relationship network to secure these institutional-quality assets. We are also unique among our competitors as we have the ability to be an all-cash buyer, eliminating lending risk and closing quickly.”

Peachtree Group expects market transactions to accelerate through the remainder of the year and continue into 2024.

Year-to-date, the company’s development division has closed on three new projects representing $293 million in aggregate value:

  • Embassy Suites (Gulf Shores, AL) – 257 keys
  • Caption by Hyatt (Nashville) – 210 keys
  • AC by Marriott (Detroit) – 154-keys

In addition, the development team has opened five hotels with a combined development cost of approximately $119 million:

  • Hilton Garden Inn (Florence, KY) – 123 keys
  • Hilton Garden Inn (Pensacola, FL) – 102 keys
  • Hampton Inn (Delray Beach, FL) – 143 keys
  • Hampton Inn and Home2 Suites (Lake Nona, FL) – 150 keys (80 Hampton Inn + 70 Home2 Suites)

The development division, which builds hotels on Peachtree Group’s behalf as well as through joint ventures with strategic partners, is expected to break ground prior to year-end on the construction of four more hotels with an aggregate value of $200 million.

“Supply growth of new hotel rooms continues to be hampered by the challenges from the pandemic and has been further impacted today with dislocation in the credit markets,” said Will Woodworth, VP, investments, development, Peachtree Group. “We believe supply will continue to be limited for the foreseeable future and have ramped up our development pipeline in response.”