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Press Release
5 min read

Peachtree Group Wins Multiple Marriott Select Brands Awards During Ceremony

Peachtree Group announced that it received multiple Marriott Select Brands (MSB) Awards during this year’s Marriott Select Brands Owner & Franchisee CONNECT Conference in Orlando, Fla., including Gold Circle winner, SpringHill Suites Dallas Rockwall, Texas

ATLANTA (July 2, 2024) – Peachtree Group (“Peachtree”) announced that it received multiple Marriott Select Brands (MSB) Awards during this year’s Marriott Select Brands Owner & Franchisee CONNECT Conference in Orlando, Fla. The awards recognize hotels that demonstrate outstanding service, innovation and commitment to guest satisfaction.

“These awards are a testament to the exceptional work our hotel associates deliver every day,” said Steve Mackenzie, Peachtree’s senior vice president of operations, hospitality management. “These hotels have consistently excelled in guest and F&B satisfaction, setting a benchmark for unparalleled service, and we are proud to have them as part of the Peachtree family. Additionally, we extend our gratitude to our partners who entrust us with managing their properties. Their collaboration has been instrumental in achieving these accolades, showcasing our shared commitment to superior quality.”

The award winners include:

Platinum Circle

·        SpringHill Suites Lindale, Texas

Gold Circle

·        Fairfield Inn & Suites Gadsden, Alabama

·        SpringHill Suites Dallas Rockwall, Texas

·        TownePlace Suites Dallas Rockwall, Texas

Silver Circle

·        Courtyard by Marriott Indianapolis Plainfield, Indiana

·        SpringHill Suites Vero Beach, Florida

F&B Satisfaction

·        SpringHill Suites Lindale, Texas

“Every recipient of these awards embodies the essence of Peachtree’s mission, showcasing outstanding excellence, strong leadership and a relentless dedication to serving our guests, partners and communities,” said Shara Roddan, vice president of operations, hospitality management.

About Peachtree Group
Peachtree Group is a vertically integrated investment management firm specializing in identifying and capitalizing on opportunities in dislocated markets, anchored by commercial real estate. Today, the company manages billions in capital across acquisitions, development and lending, augmented by services designed to protect, support and grow its investments. For more information, visit www.peachtreegroup.com.

Press Release
5 min read

Peachtree Group Provides $10.7 Million in CPACE Financing in Nashville

Peachtree Group originated its first commercial property assessed clean energy (CPACE) financing in Tennessee with a $10.7 million loan for a Class-A office development in Nashville. This marks one of the first properties in the city of Nashville and Davidson County to utilize CPACE.

NASHVILLE (June 25, 2024) – Peachtree Group originated its first commercial property assessed clean energy (CPACE) financing in Tennessee with a $10.7 million loan for a Class-A office development in Nashville. This marks one of the first properties in the city of Nashville and Davidson County to utilize CPACE.

The four-story, 75,000 sq. ft. office building at 1621 Ensley Blvd. is situated between Nashville’s central business district and the Wedgewood-Houston district. The CPACE financing, set over a 30-year term, will fund the office’s lighting, building envelope, HVAC, plumbing, and roof using a combination of retroactive and future funding. Division Street Development is developing the project, with a targeted completion date of October 2024.

Office and commercial real estate owners face challenging years ahead, with trillions of dollars in debt maturing and refinancing becoming more difficult due to tightened bank lending standards.

Peachtree Group originated its first commercial property assessed clean energy (CPACE) financing in Tennessee with a $10.7 million loan for a Class-A office development in Nashville. This marks one of the first properties in the city of Nashville and Davidson County to utilize CPACE.

“For eligible projects, CPACE financing remains one of the most attractive options to bring a project to completion. We are pleased to assist Division Street Development in securing the final piece needed to complete the financing puzzle for their office development,” said Jared Schlosser, Peachtree’s executive vice president and head of CPACE.

CPACE programs offer a unique opportunity for property owners to finance the up-front cost of energy or other eligible improvements on a property. This is then repaid over time through a voluntary assessment, as outlined by the U.S. Department of Energy. In Tennessee, property owners can leverage CPACE financing up to 25% loan to value, providing a flexible and sustainable financing option.

In 2021, the Tennessee State legislature passed CPACE enabling legislation, allowing counties or cities to establish CPACE programs.

Peachtree Group Credit is a direct commercial real estate lender offering permanent loans, bridge loans, mezzanine loans, CPACE financing and preferred equity investments across all commercial real estate sectors.

About Peachtree Group
Peachtree Group is a vertically integrated investment management firm specializing in identifying and capitalizing on opportunities in dislocated markets, anchored by commercial real estate. Today, the company manages billions in capital across acquisitions, development and lending, augmented by services designed to protect, support and grow its investments. For more information, visit www.peachtreegroup.com.

Contact:

Charles Talbert                                                                                                  

678-823-7683                                                                                                    

ctalbert@peachtreegroup.com

Press Release
5 min read

Peachtree Group Named to Inc.'s 2024 U.S. Best Workplaces

Peachtree Group has been proudly named to Inc.'s annual Best Workplaces list. This award is a testament to our continuous growth and success, further solidifying our previous Top Place to Work recognition from USA Today.

ATLANTA (June 24, 2024) – Peachtree Group, a leading private equity firm specializing in identifying and capitalizing on opportunities in dislocated markets, has been proudly named to Inc.'s annual Best Workplaces list. This prestigious recognition not only highlights our company's excellence but also our team's dedication to creating exceptional workplaces and company cultures. This award is a testament to our continuous growth and success, further solidifying our previous Top Place to Work recognition from USA Today.

"Recognitions like Inc.'s annual Best Workplaces and USA Today's Top Places to Work are particularly meaningful to us because they reflect our team members' positive feedback, something we deeply value," said Greg Friedman, Peachtree's managing principal and CEO. "Winning these awards demonstrates our commitment to culture and inclusion truly resonates with our team. We believe in providing a healthy work/life balance to support our team members. When our team feels cared for, they show even stronger commitment to their work, leading to positive business impacts and increased employee engagement."

Inc. selected 543 honorees this year. Each nominated company participated in an employee survey, which included topics such as management effectiveness, perks, fostering employee growth and overall company culture.

"Each year, Inc.'s Best Workplaces program recognizes the very best in terms of companies that have fostered a truly amazing culture," says Inc. editor-in-chief Mike Hofman. "We use hard metrics and data as well as qualitative measures for judging in order to find the very best—and we're proud that the program is highly selective."

In addition to being named as one of Inc.'s Best Workplaces and USAToday’s Top Place to Work, Peachtree’s Friedman, Jatin Desai, managing principal and CFO, and Daniel Siegel, principal and president, credit, were recipients of GlobeSt.’s 2024 Best Bosses in Commercial Real Estate Award, celebrating leaders who exemplify ambition, financial acumen, exceptional people skills and inspire innovation through their exemplary leadership. In addition, Michael Ritz, Peachtree executive vice president, investments, and Siegel were selected as Commercial Real Estate’s Aspiring Leaders of 2024.

About Peachtree Group
Peachtree Group is a vertically integrated investment management firm specializing in identifying and capitalizing on opportunities in dislocated markets, anchored by commercial real estate. Today, the company manages billions in capital across acquisitions, development and lending, augmented by services designed to protect, support and grow its investments. For more information, visit www.peachtreegroup.com.

Contact:

Charles Talbert                                                                                                  

678-823-7683                                                                                                    

ctalbert@peachtreegroup.com                                                

Insight
5 min read

Lessons Learned: Insights from Peachtree Group Senior Leaders

Peachtree's track record in commercial real estate is impressive. Our team has thrived through three significant economic disruptions. Our senior leaders have been instrumental in that success. Recently we asked those leaders to reflect on their lessons learned and share how that experience has shaped their thought process moving forward. Here are a few of those insights.

Peachtree's track record in commercial real estate is impressive. Our team has thrived through three significant economic disruptions. Our senior leaders have been instrumental in that success. Recently we asked those leaders to reflect on their lessons learned and share how that experience has shaped their thought process moving forward.

Here are a few of those insights.

Lessons Learned with Peachtree Leaders Managing Principles

"Building a formidable team is crucial for realizing your vision. Select individuals based on their exceptional skills and expertise and then trust them to excel in their roles. Empowering your team unlocks their full potential, driving extraordinary results and propelling your organization to new heights."

Greg Friedman and Jatin Desai – Managing Principals

 

“Foresight is critical in the investment process, requiring continuous consideration of macroeconomic conditions alongside local economic factors. This dual analysis enables us to identify nuanced opportunities and manage risks more effectively. By integrating global and regional insights, we can make more informed and strategic decisions, enhancing the potential for the investment's long-term success."

Greg Friedman, Managing Principal and CEO

 

“Ensure sufficient liquidity to maintain resilience. We have implemented and consistently maintained this approach for our Funds. While it may impact internal rates of return (IRR), it will allow us to endure market volatility and retain assets. Asset values typically rebound if adequate capital is available to weather downturns.”

Jatin Desai, Managing Principal and CFO

 

Lessons Learned with Peachtree Leaders

“Navigating through development always entails its share of challenges and victories, a reality underscored especially during Covid. While previous downturns primarily revolved around financial aspects, the pandemic introduced disruptions in cost, labor, and material supply chains. Reaching a semblance of normalcy took nearly three years, during which we remained steadfast in risk mitigation across these fronts. Adaptations in processes, timing, procurement strategies, and collaborations with skilled contractors were pivotal in this regard. Despite each disruption, we observed a consistent upward trend in average daily rates, particularly for newer or like-new assets.”

Mitul Patel, Principal

 

“Anticipate various exit scenarios: While one of our investments succeeded with the SBA refinance strategy, another encountered challenges. Legal issues with the borrower disqualified them from SBA eligibility, leading to loan refinance challenges. In hindsight, we were too dependent on a single exit source and now underwrite deals to ensure there are several (refinance, sale, loan sale) exit options available.”

Michael Harper, President, Hotel Lending

 

“Constant exposure to various transactions across different levels has enabled us to recognize patterns and anticipate issues during negotiations. This depth of experience has honed our ability to streamline the process, focusing on the crucial issues and avoiding unnecessary distractions. Ultimately, efficiency is paramount.”

Kevin Cadin, General Counsel

 

“The priority lies in cultivating a pipeline rather than managing individual transactions. The true value lies in the pipeline itself, not the deals outlined in term sheets. This approach grants the freedom to negotiate without the pressure of immediate results. Consequently, I rarely push terms or additional proceeds because I know the depth of additional opportunities and have confidence in the channels that have been developed to continue generating opportunities.”

Daniel Siegel, Principal and President, CRE

 

“The90% rule. It is often better to make a decision with 90% of the information or90% of what you would ideally like an output to be. That last 10% which is for perfection often leads to analysis paralysis and the opportunity cost of waiting is often greater than the value achieved in getting the last 10%. There is no such thing as perfect.”

Brian Waldman, Chief Investment Officer

Press Release
5 min read

Peachtree Group Funds Net Lease Retail, Medical and Industrial Properties

Peachtree Group has expanded its financing program to include net lease retail, medical and industrial properties. The program provides up to 100% loan to cost construction financing for these asset classes, effectively addressing a critical gap in the current commercial real estate market.

ATLANTA (June 20, 2024) – Peachtree Group (Peachtree) has expanded its financing program to include net lease retail, medical and industrial properties. The program provides up to 100% loan to cost construction financing for these asset classes, effectively addressing a critical gap in the current commercial real estate market.

The commercial real estate market is currently experiencing a void between tenant expansion plans and financing availability. Developers need alternative financing solutions, as banks have pulled back on lending due to exposure and liquidity constraints.

“Peachtree’s comprehensive financing offerings come at a critical time, as the retail vacancy rate in the U.S. reached a historic low of 4.6% in December 2023, while construction starts significantly declined due to increased financing costs and reduced capital availability,” said Daniel Siegal, Peachtree’s principal and president, CRE.

Net lease financing requires a tenant to pay base rent along with property taxes, insurance, and maintenance costs. This long-term and stable arrangement makes it highly suitable for financing new construction projects. Triple net leases, in particular, enhance this method's value in commercial real estate. By securing lease commitments from creditworthy tenants, developers can leverage stable income streams to secure favorable financing terms.

Net Lease Program Highlights:

  • Flexible Financing Options: Multiple and single net lease financing.
  • Innovative Solutions: Flexible capital to support complex deals.
  • In-House Loan Servicing: Dedicated servicing for a streamlined process.

Terms:

  • Interest Only: Payment options to ease cash flow management.
  • High Loan-to-Value: Up to 80% of finished value.
  • Comprehensive Loan-to-Cost: Up to 100% LTC.

 

“As a nationwide balance-sheet lender, Peachtree Group offers competitive terms, in-house loan servicing, and flexible capital to handle a wide array of projects. Our net lease financing is designed to provide the flexibility and support needed for successful project execution, no matter how complex the deal,” said Siegel.

Through various programs, Peachtree provides full-stack debt capital solutions to qualified commercial real estate owners across all sectors throughout the U.S.

For more information about Peachtree Group’s Triple Net Lease financing and how it can benefit your business, please visit our website at www.peachtreegroup.com/credit.

About Peachtree Group
Peachtree Group is a vertically integrated investment management firm specializing in identifying and capitalizing on opportunities in dislocated markets, anchored by commercial real estate. Today, the company manages billions in capital across acquisitions, development and lending, augmented by services designed to protect, support and grow its investments. For more information, visit www.peachtreegroup.com.

Contact:

Charles Talbert                                                                                                  

678-823-7683                                                                                                    

ctalbert@peachtreegroup.com

Insight
5 min read

Unlocking Potential: Three Trends Shaping the Net Lease Retail Market

The latest trends in NNN lease financing reflect a shift towards more innovative financing structures, driven by a need for greater efficiency and adaptability in an ever-changing market landscape. In this article are three trends Peachtree is seeing in the marketplace, as well as in our deal flow.

Triple net lease (NNN) financing has emerged as a pivotal trend in the retail sector, offering a unique blend of stability and flexibility for investors and developers. As commercial real estate continues to evolve, NNN leases provide an attractive model where tenants assume responsibility for property taxes, insurance, and maintenance, significantly reducing financial risk for landlords. This arrangement not only ensures a steady income stream but also aligns with the growing demand for scalable and sustainable building projects.

The latest trends in NNN lease financing reflect a shift towards more innovative financing structures, driven by a need for greater efficiency and adaptability in an ever-changing market landscape. Below are three trends Peachtree is seeing in the marketplace, as well as in our deal flow.

Supply and Demand Imbalance

As of Q1 2024, single-tenant retail development volume remained low. Rolling four-quarter completions totaled only 19.5 million square feet, which is 68% of the 10-year average (CBRE).

National tenants with strong credit have detailed expansion plans to grow their store fleets:

     
  • 7-Eleven (A-rated credit) plans to add 7,000 stores over the upcoming years.
  •  
  • Chipotle (strong private credit) plans to add 300 stores in 2024.
  •  
  • Tractor Supply Company (BBB credit) plans to add 70 stores in 2024 and 90+ in the following years.
  •  

Flexibility in Lease Terms

Tenants are becoming more flexible with their lease terms in this inflationary and high-interest rate environment to help encourage development and provide buyers with more attractive assets. For example:

  • Starbucks has increased the primary term on some build-to-suit leases from 10 to 15 years.
  • Dollar General, which traditionally had a flat lease structure, has begun incorporating 5% rent bumps in their primary term.

Preference for Small Spaces

A significant trend in the retail sector is the preference for small spaces under 2,500 square feet, which make up over two-thirds of executed leases. Consequently, quick-service and fast-casual restaurants, which typically fit within this size range, have reported nearly 2,000 potential openings in 2024. This includes popular chains such as McDonald's, Chipotle, and Dutch Bros. (JLL).

What we are Seeing at Peachtree

Peachtree Group funds muti- and single net lease deals in retail, medical and industrial. Peachtree is seeing a variety of projects across the spectrum, from standalone quick service restaurants to grocery anchored centers. Currently, our team is favoring deals with experienced developers and strong national tenants.

Why Peachtree?

  • Flexible Financing Options: Multiple and single net lease financing across retail, industrial, and medical
  • Innovative Solutions: Flexible capital to support complex deals.
  • In-House Loan Servicing: Dedicated servicing for a streamlined process.

To learn more or get a quote, contact us at lending@peachtreegroup.com.

Press Releases & Insights

Learn more about what Peachtree Group has to say about our industry.

Insight
5 min read

Lessons Learned: Insights from Peachtree Group Senior Leaders

Peachtree's track record in commercial real estate is impressive. Our team has thrived through three significant economic disruptions. Our senior leaders have been instrumental in that success. Recently we asked those leaders to reflect on their lessons learned and share how that experience has shaped their thought process moving forward. Here are a few of those insights.

Peachtree's track record in commercial real estate is impressive. Our team has thrived through three significant economic disruptions. Our senior leaders have been instrumental in that success. Recently we asked those leaders to reflect on their lessons learned and share how that experience has shaped their thought process moving forward.

Here are a few of those insights.

Lessons Learned with Peachtree Leaders Managing Principles

"Building a formidable team is crucial for realizing your vision. Select individuals based on their exceptional skills and expertise and then trust them to excel in their roles. Empowering your team unlocks their full potential, driving extraordinary results and propelling your organization to new heights."

Greg Friedman and Jatin Desai – Managing Principals

 

“Foresight is critical in the investment process, requiring continuous consideration of macroeconomic conditions alongside local economic factors. This dual analysis enables us to identify nuanced opportunities and manage risks more effectively. By integrating global and regional insights, we can make more informed and strategic decisions, enhancing the potential for the investment's long-term success."

Greg Friedman, Managing Principal and CEO

 

“Ensure sufficient liquidity to maintain resilience. We have implemented and consistently maintained this approach for our Funds. While it may impact internal rates of return (IRR), it will allow us to endure market volatility and retain assets. Asset values typically rebound if adequate capital is available to weather downturns.”

Jatin Desai, Managing Principal and CFO

 

Lessons Learned with Peachtree Leaders

“Navigating through development always entails its share of challenges and victories, a reality underscored especially during Covid. While previous downturns primarily revolved around financial aspects, the pandemic introduced disruptions in cost, labor, and material supply chains. Reaching a semblance of normalcy took nearly three years, during which we remained steadfast in risk mitigation across these fronts. Adaptations in processes, timing, procurement strategies, and collaborations with skilled contractors were pivotal in this regard. Despite each disruption, we observed a consistent upward trend in average daily rates, particularly for newer or like-new assets.”

Mitul Patel, Principal

 

“Anticipate various exit scenarios: While one of our investments succeeded with the SBA refinance strategy, another encountered challenges. Legal issues with the borrower disqualified them from SBA eligibility, leading to loan refinance challenges. In hindsight, we were too dependent on a single exit source and now underwrite deals to ensure there are several (refinance, sale, loan sale) exit options available.”

Michael Harper, President, Hotel Lending

 

“Constant exposure to various transactions across different levels has enabled us to recognize patterns and anticipate issues during negotiations. This depth of experience has honed our ability to streamline the process, focusing on the crucial issues and avoiding unnecessary distractions. Ultimately, efficiency is paramount.”

Kevin Cadin, General Counsel

 

“The priority lies in cultivating a pipeline rather than managing individual transactions. The true value lies in the pipeline itself, not the deals outlined in term sheets. This approach grants the freedom to negotiate without the pressure of immediate results. Consequently, I rarely push terms or additional proceeds because I know the depth of additional opportunities and have confidence in the channels that have been developed to continue generating opportunities.”

Daniel Siegel, Principal and President, CRE

 

“The90% rule. It is often better to make a decision with 90% of the information or90% of what you would ideally like an output to be. That last 10% which is for perfection often leads to analysis paralysis and the opportunity cost of waiting is often greater than the value achieved in getting the last 10%. There is no such thing as perfect.”

Brian Waldman, Chief Investment Officer

Insight
5 min read

Market Insights from Dennis Lockhart: U.S. Economic Outlook, Fed Policy, and Commercial Real Estate Trends

Peachtree Group CEO Greg Friedman and CFO Jatin Desai hosted Dennis Lockhart, former President of the Atlanta Federal Reserve for a fireside chat conversation on the US economic outlook, Federal Reserve policy, geopolitical risks and commercial real estate trends. ‍Here are key highlights from their discussion.

Peachtree Group CEO Greg Friedman and CFO Jatin Desai hosted Dennis Lockhart, former President of the Atlanta Federal Reserve for a fireside chat conversation during Peachtree Group's annual Investor Day. Lockhart spoke on the US economic outlook, Federal Reserve policy, geopolitical risks and commercial real estate trends.

Here are key highlights from their discussion.

Dennis Lockhart, former President of the Atlanta Federal Reserve talks with Peachtree CEO Greg Friedman and CFO Jatin Desai about the US economic outlook, Federal Reserve policy, geopolitical risk sand commercial real estate.

Summary of the Economy:

  • The U.S. economy is performing well with steady growth. First-quarter growth was around 1.3-1.4% annualized GDP, but underlying indicators suggest stronger performance, with the Atlanta Fed projecting 3.1% annualized GDP growth for Q2 2024.
  • Unemployment is low at 4%, with recent job gains of 272,000. The private sector, especially healthcare, is driving job growth, leading to a more sustainable employment market and supporting consumer spending.
  • Strong employment ensures income stability for consumers, driving sustained consumption, which constitutes about 70% of GDP.
  • Inflation has decreased from its peak but remains above the Federal Reserve's target. The Fed prefers the Personal Consumption Expenditure (PCE) Index over the Consumer Price Index (CPI), with the current core PCE inflation rate at 2.7-2.8%, still above the 2% target. While adjusting the target inflation rate from 2% seems highly unlikely due to the Fed’s strong commitment and public trust in this goal, a more flexible approach within a defined range might be possible. This allows     the Fed to address inflation without formally changing the target, leveraging the current economic strength to be patient and let inflation decline over time.

Federal Open Market Committee’s Perspective:

  • The Federal Open Market Committee (FOMC) is committed to making decisions on interest rates and monetary policy without political influence. Over a decade of attending meetings, Dennis has rarely seen political considerations come up. However, by tradition, the FOMC avoids action in the meeting immediately before a national election to prevent any appearance of political bias. Under Jay Powell's leadership, if necessary, the FOMC would act in September, but current conditions likely won't force action until after the election.
  • While different policies implemented by the elected candidate could shape the economy in the long term, the election itself is not anticipated to have an immediate impact. However, if post-election circumstances lead to significant disruptions, it could give the Federal Reserve pause at their November meeting.
  • If inflation doesn't improve or disinflation stalls at around 2.7-2.8%, the Fed may need to raise rates further. Conversely, consistent positive disinflation data     could lead to rate cuts by year-end. There are several scenarios to consider:
    • Sticky Inflation: If inflation remains high, the Fed might raise rates toward the end of the year or early 2025.
    • Disinflation Resumption: Positive disinflation data could lead to rate cuts in November or December.
    • Economic Slowdown: If the economy shows signs of faltering and businesses anticipate a recession, resulting in layoffs and reduced consumer spending, the Fed might cut rates to stabilize the situation.
    • Financial Instability: A financial stability event, similar to the Silicon Valley Bank incident last year, could prompt the Fed to cut rates to address underlying banking system issues, especially in commercial real estate.
  • The FOMC's narrative is that the economy is gradually slowing down. The employment picture remains very positive and strong, though it is rebalancing and not as robust as in 2022 and 2023. Inflation is still elevated, but the FOMC believes disinflation will resume, allowing them to begin easing policy restrictions by the end of the year. However, all of this depends on how the data comes in and the overall economic picture painted by the upcoming months. Upcoming Fed meetings are scheduled for July, September, November, and December. Policymaking remains cautious, with an emphasis on waiting for clear trends in inflation data before making further changes.

 

Geopolitical Risks:

  • Geopolitical events can significantly impact financial markets and potentially change the economic outlook for the U.S., at least temporarily. These events, often unexpected, can disrupt equity markets and influence the economy.  However, the Federal Reserve tends to be largely oblivious to geopolitics. Despite being close to the State Department, the Fed staff, mostly PhD economists, focus primarily on domestic issues and rarely consult with experts on geopolitical matters. This domestic focus means that while geopolitical events are serious and can influence the economy, they are not heavily factored into the Fed's policy decisions or economic projections.

 

Monetary Policy:

  • The balance sheet is a central tool for monetary policy. When interest rates hit zero during the Great Recession and the pandemic, the Fed used quantitative easing (QE) to stimulate the economy by increasing bank reserves, which supports lending and adds liquidity to financial markets. This led to the significant expansion of the Fed's balance sheet.
  • Currently, the Fed is slowly reducing its balance sheet to withdraw stimulus from the economy. This process, known as quantitative tightening, aims to find a new balance that provides ample bank reserves and liquidity without disrupting credit markets. The Fed approaches this carefully to avoid financial instability, such as the incident that occurred during a previous tightening attempt. This balance sheet adjustment is a critical but often behind-the-scenes aspect of monetary     policy.

Fiscal Policy:

  • Fiscal policy, especially deficit spending, boosts demand and contributes to inflation. During the pandemic, significant stimulus measures supported households and businesses but also added to inflationary pressures. However, inflation is a global issue and not solely caused by domestic fiscal policy.
  • Federal Reserve Chairman Jay Powell acknowledges the unsustainable fiscal situation due to high debt levels but avoids criticizing Congress. The Fed factors in fiscal policy as one of many economic influences, recognizing its role in supporting growth, which can conflict with the Fed's inflation control efforts.
  • The Treasury's debt issuance strategy affects the bond market and banks holding these securities. Fiscal and monetary policies often create conflicting pressures, but the Fed incorporates these effects into their economic assessments and decisions.

 

Banking Sector:

  • Banks, particularly regional and community banks, have significant exposure to commercial real estate, making up around 40% of the market. While national banks have less exposure, the real estate market downturn has affected all banks, with properties like office spaces experiencing severe value declines and multifamily properties down by nearly 30% from their peak values due to high interest rates. Despite Federal Reserve Chair Powell's reassurances about the banking system's     stability, there are concerns about the real-time recognition of crises. Historical precedent suggests that crises often go unnoticed until they are well underway.
  • The upcoming maturities of approximately $850 billion in commercial real estate loans present a potential risk. The exposure is dispersed across various financial entities, which is somewhat reassuring. However, small and regional banks are particularly vulnerable. The failure of a significant regional bank due to real estate exposure could have severe economic repercussions, unlike the manageable impact of community bank failures.
  • Banks are currently managing the situation by extending loan maturities, effectively buying time to stabilize individual properties. While this approach can mitigate immediate issues, it also reduces banks' lending appetite. A significant reduction in credit availability, particularly for small businesses that rely on smaller banks, could trigger a recession. This dynamic highlights the delicate balance between managing existing problems and maintaining sufficient credit flow to support economic activity.

Commercial Real Estate:

  • The near-term and long-term valuations of commercial real estate, particularly in hospitality, will depend on market fundamentals. The office sector faces significant challenges due to the rise of remote work, which could reduce long-term demand for office space. Companies are still figuring out their office policies, with some adopting hybrid models.
  • The retail sector is affected by online shopping, and the hospitality sector is recovering from the pandemic but hasn't fully rebounded. There are no major issues expected in hospitality unless there is overbuilding.
  • Office spaces were already saturated pre-pandemic, and suburban offices now struggle to find tenants. Many offices remain underutilized, with some businesses likely to stay remote. Converting office buildings to apartments is often not feasible due to technical constraints.
  • The multifamily housing sector continues to show strong demand and remains a stable area in commercial real estate.

Press Release
5 min read

Peachtree Group Closes $40 Million in CPACE Financing for AC Hotel in 23 Days

Peachtree Group originated a $40 million retroactive CPACE loan to BLG SAN DIEGO, LLC (BLG) for its recently opened 147-room AC Hotel San Diego Downtown Gaslamp Quarter in Calif. The Commercial Property Assessed Clean Energy (CPACE) financing was amortized over 30 years and required no payment for a year, followed by five years of interest-only payments.

ATLANTA (June 24, 2024) – With ongoing credit market dislocations, Peachtree Group originated a $40 million retroactive CPACE loan to BLG SAN DIEGO, LLC (BLG) for its recently opened 147-room AC Hotel San Diego Downtown Gaslamp Quarter in Calif.  The Commercial Property Assessed Clean Energy (CPACE) financing was amortized over 30 years and required no payment for a year, followed by five years of interest-only payments. Also, the proceeds allowed BLG to pay down its senior loan with California-based Preferred Bank and E. Sun Commercial Bank, Ltd. to under $20 million, there by mitigating the banks’ exposure.

“This innovative capital structure significantly alleviated the immediate financial pressures, enabling the hotel to establish a solid cash flow foundation during its initial years of operation,” said Greg Friedman, Peachtree Group’s managing principal and CEO.

Despite the U.S. hotel industry's strong RevPAR performance, multiple headwinds exacerbate financial stress for owners. These headwinds include the lagging profitability of U.S. hotels, persistently high interest rates and historically high property insurance costs.

AC Hotel San Diego Downtown Gaslamp Quarter

“When we opened the AC Hotel San Diego Downtown Gaslamp Quarter in March 2023, there was a sizeable disconnect between hospitality fundamentals, which are strong, particularly in San Diego, while the debt markets were deteriorating meaningfully,” said Brad Honigfeld, founder, chairman and co-CEO of the New Jersey-based Briad Group®.“ The Fed’s tightening process and rising fund rates drove up the cost of debt considerably.”

Hotel and commercial real estate owners face a tough few years as trillions of dollars in debt come due, and refinancing gets harder, compounded by banks' tightened lending standards.

According to JLL Research, by the end of 2024, $5.8 billion worth of U.S. hotel-securitized loans will be due for repayment, requiring full payment, refinancing, extension or sale. However, if these loans were refinanced at current interest rates, most would struggle to generate enough income to cover their debt costs.

In this challenging lending market, Commercial Property Assessed Clean Energy (CPACE) financing has become a vital source of liquidity. This option is growing in importance as owners face impending debt maturities and scarce refinancing opportunities.

CPACE financing has rapidly gained traction in the commercial real estate market, reaching a cumulative $7.2 billion in the U.S. in just over a decade, according to PACENation. This significant milestone underscores the growing acceptance and adoption of CPACE financing as an innovative and effective solution. Peachtree Group, a key player in this market, has demonstrated its commitment to CPACE financing, with over $800 million in CPACE originations.  

The AC Hotel San Diego Downtown Gaslamp Quarter is in downtown San Diego's Gaslamp Quarter, known for its restaurants, shops and nightlife.

“Our hotel was benefiting from its location and performing to its original underwriting, but the debt costs were straining cash flows,” Honigfeld said.

Retroactive CPACE funding offers unique advantages for property owners. It operates similarly to normal pre-project funding, with one key difference: 100% of the loan proceeds can be used to reimburse the property owner for costs already incurred. This feature makes retroactive CPACE a valuable resource for property owners seeking better loan terms or improved cash flow for completed projects.

“The financial relief it provides not only ensures the hotel's success but also positions it for long-term stability. By reducing the financial burden in the early years, owners can focus on delivering exceptional guest experiences and achieving operational excellence,” Friedman said.

This strategic approach paves the way for the asset to transition to a more favorable financing market in the future, ensuring its sustained profitability and growth.

About Peachtree Group
Peachtree Group is a vertically integrated investment management firm specializing in identifying and capitalizing on opportunities in dislocated markets, anchored by commercial real estate. Today, the company manages billions in capital across acquisitions, development and lending, augmented by services designed to protect, support and grow its investments. For more information, visit www.peachtreegroup.com.

Contact:

Charles Talbert                                                                                        

678-823-7683                                                                                          

ctalbert@peachtreegroup.com

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