Peachtree invests $1.1 billion in commercial real estate

PEACHTREE GROUP’S CREDIT division has closed $556 million in loan originations, accounting for half of the $1.1 billion deployed by the company this year. The remaining $526 million was allocated for the acquisition of five hotels and the initiation of three new hotel development projects.

The company also launched five hotels that were under construction as of September, Peachtree Group said in a statement.

“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 of Peachtree Group. “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.”

The challenge at hand is the ability to refinance maturing debt, with an estimated $1.9 trillion of U.S. commercial real estate debt maturing before the end of 2026, the company said.

Peachtree Group Credit, previously known as Stonehill, secured the eighth position among U.S. commercial real estate hotel lenders by the Mortgage Bankers Association 2022 loan origination rankings.

Seasoned commercial lender

As a direct commercial real estate lender, Peachtree offers permanent loans, bridge loans, mezzanine loans, commercial property-asset clean energy (CPACE) financing, and preferred equity investments across all sectors of commercial real estate, with its origins in the hospitality industry.

Here are the notable credit transactions for hotels completed this year:

• A $47.9-million first mortgage loan facilitated the construction of a 215-room Autograph Collection hotel in Huntsville, AL, slated to open in 2024.
• A $43.6-million first mortgage loan was extended to the 220-room Hampton Inn New York-LaGuardia Airport, aimed at project recapitalization and covering deferred maintenance and CapEx costs.
• A $42.2-million first mortgage loan supported the 133-room Motif on Music Row (Nashville), refinancing existing debt and facilitating project completion, with an anticipated opening in November 2023.
• An $8.4-million CPACE financing was provided to support various energy-efficient and sustainability aspects of a hotel under construction in Detroit, MI.

“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, senior vice president, 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.”

Acquisition portfolio 

Peachtree Group's acquisition division successfully acquired five hotels, totaling 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,” he added. “We are also unique among our competitors as we have the ability to be an all-cash buyer, eliminating lending risk and closing quickly.”

Meanwhile, the company expects a surge in market transactions for the remainder of the year, extending into 2024.

Pioneering developments 

Year-to-date, the company's development division completed three new projects, totaling $293 million in aggregate value:

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

Furthermore, the development team has launched five hotels, with a combined development cost of around $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, responsible for constructing hotels on behalf of Peachtree Group and through joint ventures with strategic partners, is set to commence construction on four additional hotels valued at a total of $200 million before the end of the year, the company said.

“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, vice president, 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.”

“Despite headwinds in the broader markets, Peachtree is well-positioned, capitalized and oriented to strategically target the submarkets and demand segments where new hotels rooms, when realized, will flourish,” Woodworth added.

In September, Peachtree Group introduced new branding, logo, and tagline: 'Guided by Intuition, Grounded by Expertise,' emphasizing the company's unified investment strategies and service offerings. Peachtree also streamlined the brand portfolio, renaming Stonehill to Peachtree Group Credit and Peachtree Hospitality Management to Peachtree Group Hospitality Management.