Commercial Observer: Peachtree Group Refis Seattle Hotel With $68MM Loan
Peachtree Group originated the three-year $68.15 million loan to refinance a newly opened Seattle hotel asset
In a rapidly shifting economic environment, hotel developers and lenders are adapting their strategies to secure successful outcomes for hotel projects. We sat down with Jared Schlosser, EVP of Hotel Lending and Head of CPACE at Peachtree Group to discuss how rising interest rates and inflationary pressures are influencing lending criteria and financial planning.
Q: Given the rising interest rates and inflationary pressures, how are lenders adjusting their underwriting criteria for hotels?
Jared Schlosser: Right now, it's all about cash flow. It’s hard to underwrite any sort of pro forma growth unless there’s a real story behind it. Lenders are focused on the cash flow, and if you can achieve a 13% debt yield or higher, you qualify for generally permanent debt, CMBS, life company, or even bank takeouts. If you don’t meet that threshold, then you typically fall into the private credit space, which is where Peachtree Group comes in.
Q: What are the current trends in loan terms, such as loan-to-value (LTV) ratios or interest rates?
JS: It’s been quite varied, depending on what each lender's risk threshold is. The biggest trend I’m seeing is uncertainty around how long rates will stay elevated. Because of that, borrowers are seeking flexibility. They’re willing to pay a premium for loans with shorter yield maintenance or reduced prepayment penalties. Many are hesitant to lock into long-term fixed-rate debt like they used to.
We provide both fixed-rate and floating-rate loans, but even with fixed-rate products, borrowers are trying to secure as much flexibility as possible. We’re still getting to 70% loan-to-cost (LTC) or LTV, sometimes pushing up to 75% or scaling back, depending on our underwriting. In contrast, the banking market is closer to 50-55% on average, which highlights the difference between our space and traditional banks.
Q: How should developers adapt their financial strategies in this market?
JS: I always say in a volatile market, get ahead of it. Be proactive—get ahead of your maturity dates and start conversations early, whether it’s with us or other competitors in the space. Early engagement is key right now because the future is so uncertain.
With upcoming elections, the volatility surrounding Federal Reserve policy, and questions about whether rates will be cut or stay elevated longer than expected, liquidity is fluctuating. The sooner borrowers are out in the market looking for refinances or construction financing, and the more well-prepared their packages are, the better their chances of securing favorable terms.
Peachtree Group is a direct balance sheet lender focused on funding first mortgage bridge loans, mezzanine loans, preferred equity investments, and commercial property assessed clean energy (CPACE) financing, lending to all commercial real estate asset classes with a specialty in hotel financing. The Peachtree Group team has executed more than 297 transactions, originating more than $4.5 billion for projects seeking capital to complete acquisitions, recapitalizations, refinancing and renovations.
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Commercial Observer | Peachtree Group originated the three-year, $68MM, floating-rate, first-mortgage loan with two 12-month extension options for the Atlanta-based developer’s 200-room AC Hotel in Downtown Seattle that opened in October 2024.
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Commercial Observer: Peachtree Group Supplies $36MM Refi for Houston Hotel Conversion Project
Peachtree Group originated a $36.1MM three-year, floating-rate loan with two 12-month extension for a Houston Hotel
Commercial Observer | Peachtree Group originated a $36.1MM three-year, floating-rate loan with two 12-month extension options for the DSG’s Meridien Houston Downtown hotel property located where the 1952-built Melrose Building once stood. In 2015, the developer acquired the office property, which was Houston’s first modern skyscraper, and repurposed it into a 250-room hotel that opened in 2017.
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Discover Creative Capital Solutions in a Challenging Market
In the latest episode of Peachtree Point of View podcast, CEO Greg Friedman sits down with EVP Jared Schlosser, who specializes in hotel lending and C-PACE financing. Their conversation offers valuable insights into navigating today's dislocated credit markets and finding creative solutions to capitalize commercial real estate projects.
In the latest episode of Peachtree Point of View podcast, CEO Greg Friedman sits down with EVP Jared Schlosser, who specializes in hotel lending and C-PACE financing. Their conversation offers valuable insights into navigating today's dislocated credit markets and finding creative solutions to capitalize commercial real estate projects.
Jared, who joined Peachtree in 2019 after beginning his career during the 2007 market downturn, provides a unique perspective on the dramatic shift in credit markets since then. He explains how developers are struggling with rising costs and persistently high interest rates that make traditional financing structures difficult to pencil.
Senior + CPACE
The discussion centers on how Peachtree is helping clients overcome these challenges, with particular focus on C-PACE (Commercial Property Assessed Clean Energy) financing as an innovative tool. This state-by-state legislative product allows financing for specific elements of construction (roofing, HVAC, elevators, etc.) through long-term fixed-rate loans repaid via property tax assessments.
What makes this strategy particularly powerful is the ability to combine C-PACE with senior debt to achieve higher leverage at a lower blended cost of capital. For example, on a $100 million project, developers might secure $30 million through C-PACE at 7.5% fixed (half the cost of traditional mezzanine debt), allowing them to finance 75% of project costs at favorable rates while maintaining acceptable returns.
Case Study: Washington Multifamily
Jared shares a recent success story from Washington state where Peachtree provided both senior debt and C-PACE financing, partnering with Hickory for mezzanine debt to deliver an impressive 87% capital stack. With Peachtree providing 70% through the combined senior and C-PACE loans, the borrower secured an attractive blended cost of capital for a higher-lever age construction loan. The multifamily project is located in an underserved secondary market with limited recent development—a focus area for Peachtree.The deal also featured flexible terms allowing the borrower to potentially payoff the C-PACE portion if rates decline.
Key Takeaways:
- C-PACE financing offers developers a powerful tool to replace more expensive capital in the stack, potentially reducing costs by hundreds of basis points compared to traditional mezzanine or preferred equity.
- In today's market, there are "no slam dunks" - every deal has challenges requiring creative solutions, thorough vetting, and proper risk structuring.
- Peachtree's ability to provide both senior loans and C-PACE financing creates a significant competitive advantage, allowing them to deliver financing packages higher up the capital stack.
- Speed and execution are critical in this environment, as many lenders fail to close deals due to improper risk assessment or changing credit committee decisions.
- Secondary markets with limited new supply present attractive investment opportunities, particularly for multifamily development.
Listen to the full Peachtree Point of View podcast to gain deeper insights into how you can leverage these creative capital solutions for your next commercial real estate project. Follow Peachtree Point of View on your favorite podcast platform to stay informed on investment strategies in today's challenging market.
